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In the late Spring, the Government announced that they were planning to end no-fault evictions for tenants living in private rented accommodation. In this article we look at the impact for Luton homeowners, Luton tenants and Luton buy-to-let landlords.
In the late spring, the Government announced that they were planning to end no-fault evictions for tenants living in private rented accommodation.
I have had a number of Luton landlords contact me anxious that removing a tenant from their Luton buy-to-let property in the future had possibly become a lot more problematic. Yet, at the launch of the consultation on the changes to the piece of legislation relating to no-fault evictions (called the Section 21 amendments), the Government wanted to assure British landlords that they would be protected by the bolstering of the existing Section 8 legislation. The current Section 8 allows landlords grounds for recovery of their properties for reoccupation of the landlord, non-payment of rent and other legitimate factors.
17,203 Luton landlords are affected by this
potential change in the law
Yet, it is comforting for Luton landlords and tenants in the fact that most competent letting agents very rarely have to evict a tenant. In the worst-case scenarios the tenant needs evicting (normally because rent hasn’t been paid) or because the landlord is either selling their buy-to-let investment or moving back into their property. Look at the consultation - it has been indicated that those grounds will not be removed from section 8 powers during the government’s consultation and the talk is they will be bolstered and improved. To put the removal of Section 21 notices into some context…
Only 22,527 section 21 notices made it to Court last year, out the 4.5million private rented households
Scotland banned no fault evictions (i.e. their own version of a Section 21) two years ago, and the model suggested by Westminster is similar to that of the new Scottish system. Landlords, tenants and agents have had to adapt north of the border, and there hasn’t been the mass exodus of landlords from the market since then.
Yet the call in the lettings and legal profession is … if the Government is intent on making these changes, we need well-funded courts which specialise in housing and tenancy matters (like there are for family law and children). Especially when the landlord manages the property themselves (without an agent), the issue of eviction comes about from a breakdown in communication between landlord and tenant. The courts could use their mediation skills to make it simpler and faster for tenants and landlords to obtain quick and available justice instead of the existing drawn out procedures under Section 8, which helps no one (not even tenants). This is important as the demand for Luton rental properties is growing and people need a home to live in – fact.
Luton needs an additional 819 buy-to-let properties per year
for the next decade to meet the demand from Luton tenants
As an agent in Luton, I know most Luton landlords consider buy-to-let in Luton as a long-term investment, with the average landlord looking to retain their buy-to-let property for at least 10 years and beyond. Talking to other agents around the country, over 90% of Section 21 notices are made by the tenant, not the landlord. Removing the Section 21 notice could affect tenants more than landlords.
Replacing Section 21 with a process that requires a landlord to firstly have a good reason, and secondly go through due process, will likely remove the more unprincipled landlords from the property market. That is great news as those unprincipled landlords will either sell their properties to new buy-to-let Luton landlords, or to tenants who want to buy them. So, it could be a small win for people looking for a new Luton home, and a disappointment for unprincipled landlords simply looking for a cash cow ‘have no care about the property or tenant’ investment vehicle.
If you are a Luton landlord and want to know more about this, whether you are a landlord of ours, a Luton landlord with another Luton agent or a self-managing landlord, feel free to drop me a line or pick up the phone (I don’t bite) to chat about the implications of this and other legislative changes that are on the horizon.
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In this week’s article on the Luton property market, we look at the number of properties on sale today compared to 12 months ago and also how long Luton properties are remaining on the market over the same timeframe. This makes interesting reading for both Luton house sellers and Luton buyers.
If you are either selling or buying a property in Luton, there are a few reasons why it may be taking some time to sell your Luton home or find that perfect place to call your new home. It may be taking longer than you thought to find a buyer for your home because of the current state of the property market or finding that perfect Luton home may be taking too long because of a lack of properties to buy.
So, taking everything into consideration, all of these factors invite an obvious question; how long is too long to persist in the Luton property market?
If you are looking to sell your Luton property, it may have become infuriating when your home has been on the market for longer than you anticipated. Perhaps the property market is purely in a position where it's challenging to get a property sold quickly, or sold at the price you want to achieve for it. If you do live in a Luton home that is towards the upper reaches of the price band, you have to be open to the idea that because it's worth so much more than the average property in Luton and so more than most individuals can afford, you will have to wait longer to get it sold.
Your Luton home might be taking longer to sell because your asking price is simply too high. Even if you are prepared to take a realistic offer, if you have an unrealistic asking price your overpriced Luton property will undoubtedly turn off potential buyers from even being inclined to book a viewing.
Looking at the market in Luton compared to a year ago makes very interesting reading…
When it comes to the average length of time on the market, all the property types in Luton appear to be taking longer to sell.
The overall average length of time a Luton property remains on the market has risen by 22.6%, from 74 days a year to 91 days today
The question that remains is, if you are having no luck selling should you leave your Luton property on the market or not? This is basically down to your personal circumstances - a big decider has to be if you are moving up market or downsizing.
Buyers will compare your Luton property to all the other homes on the market using the portals such as Rightmove, On the Market and Zoopla and even if your asking price is realistic, if your marketing (brochures, pictures, even video walk through) isn’t top dollar, they will dismiss your property.
Remember, the average buyer only views 4.5 properties before they buy and on average, each buyer will only spend just over 25 minutes viewing each home …
The more properties that are on the market, the greater the choice for buyers (yet more competition for house sellers), so we wanted to look at how many homes were for sale in Luton now, compared to 12 months ago.
As you can see, there are hardly any differences between the property types in Luton.
As for buying a Luton property, searching for that dream house can take time as you have to consider the needs of your spouse, children, schooling, etc., what you can realistically afford and whether your current location can accommodate you until you find that perfect Luton home.
Don’t forget that upwards of 10% of homes do not make it to the portals (the portals are Rightmove, Zoopla and On the Market), so don’t just rely on the portals to let you know what is coming on the market. The number of times I speak to disappointed buyers who missed out because other buyers registered directly with the agent for property, whilst they relied on the portals.
When it comes to buying a Luton home, and so you do not make any decisions you will regret later on, taking your time is always the more practical option. The amount of money that is involved in buying a home and all the costs connected with it means that you should not rush into buying or selling without due consideration.
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In 1979, Margaret Thatcher was voted in on a Tory landslide with the ‘right to buy your own council house’ being a mainstay of Conservative policy. She encouraged people to buy their own their own council flats and houses, although it might interest you to know, that the council tenant right to buy idea was first proposed in the late 1950s and formed part of the manifesto of the Labour party. Yet Maggie’s version was based on massive discounts for tenants and 100% mortgages (i.e. no deposit). However, the real bugbear was that half the monies raised form the house sales went to central Government and the other half to the local authorities … but that money had to be used to reduce the local authorities debt rather than building new houses - so houses were being sold and not replaced.
6,155 council homes in the Luton area have been
bought in the last 40 years (an average 154 per year)
Interestingly, the Tories relaxed the rules in 2012 for right to buy and raised the highest discount on a property to £75,000 (it has subsequently increased further, to £100,000, in some parts of the UK) meaning 364 council houses have been sold locally since the rule change, raising £37,402,091 since 2012 alone.
The issue, stated by many existing council house tenants, is that those tenants turned homeowners subsequently sell on their ex-council homes at a huge a huge profit, meaning the demographics of those areas has become ever more transient, more specifically, properties that were once council homes are now owned by buy-to-let landlords who rent them out on a short-term basis.
Yet up to this point in time, nothing has been said about ‘other’ type of social housing - housing association properties. Whilst council houses are properties owned by the local authority providing low cost social housing, housing associations also provide lower-cost social housing for people in need of a home, yet they are private, non-profit making organisations.
The Tory’s state one of the biggest divides in our British society is between those who can and cannot afford their own home, so plan to establish a new national model for shared ownership which allows people in new housing association properties to buy a proportion of their home while paying a lower/subsidised rent on the remain part - helping thousands of lower income earners get a step onto the housing ladder.
So, what for the tenants of the existing 3,819 housing association households in Luton? The Conservatives have said they will work with housing associations on a voluntary basis to determine what right to buy offer could be made to those Luton tenants, although there are already existing rules which give most housing association tenants the right to buy their home, yet with only modest discounts of £9,000 to £16,000 depending on where you live. So, what does all this mean for the current homeowners and landlords of Luton properties?
The Tory’s sold off 4,313 council houses in Luton whilst in power between 1979 and 1997
This really created waves in the housing market in the 1980’s and was a contributary factor to the housing crash of 1987 when Dual-MIRAS tax relief was removed by Nigel Lawson. By the selling off of council housing in those years they were accused of selling off the family silver cheaply, thus created the foundation of the buy-to-let boom of the early to mid 2000’s, because of major shortage of affordable housing being sold in the previous two decades.
Yet this time round, note the Tory’s state it is just for new housing association properties, not existing. Also, that tenants will have the right to go into shared ownership - NOT OUTRIGHT OWNERSHIP. This means this policy will have hardly any effect … unlike the Thatcher policies of 1979.
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Well, with the General Election just over the horizon and having been asked by a number of Luton homeowners and Luton buy to let landlords what the different main parties would do to the local property market, in this week’s article we focus on Labour’s contentious Right to Buy proposal for private tenants. Launched in September, the plan was designed to force landlords to sell their buy to let investments to their tenants who wished to buy them…. at a substantial discount.
Shadow Chancellor John McDonnell told the FT in September that, under a new Labour government, tenants would be given the Right to Buy their tenanted home with a hefty discount - just like the Tory Right to Buy policy for Council house renters that came into force after the 1979 General Election.
Yet it was not certain who would have been expected to pay for discounts on buy to let homes sold to tenants. Four years ago, Jeremy Corbyn advocated using the £14bn of tax allowances that UK landlords had at the time to pay for these discounts, allowing tenants to buy their tenanted home at the same discount as they would a local authority home without leaving the landlord out of pocket.
However, these tax allowances have been substantially reduced with the changes in the way mortgage interest relief on landlords’ mortgages is calculated, meaning that this method of funding would no longer be feasible. In fact, bankrolling a project at a modest 20% discount for the whole of the UK would cost £177.84bn; a lot more than the £14billion quoted by Mr Corbyn. So, what would that policy cost Luton landlords?
Labours policy of 20% Right to Buy discount could
cost Luton landlords £912,880,640
… and if Luton tenants got the maximum discount of 35% that Council tenants have with the Right to Buy scheme that would cost Luton landlords £1,597,541,110.
However, it appears Mr McDonnell has re-considered the original suggestion and done a (slight) U-turn, stating it should apply only to the richest landlords and not those who only own a couple of rental properties. He was quoted in The Times as saying, “There’s a large number of individuals or families who have bought another property as an asset for the future and we wouldn’t want to endanger that”.
Yet, even this somewhat watered-down account still creates threats to the private rental sector and Luton’s overall stock of private rented homes. John McDonnell seems to have altered his initial thought to permit all private tenants the right to buy from their landlords to apply only to those with more than a couple of buy to let properties. The shift appears to be aimed at pacifying middle England small time landlords who are probably swing voters with smaller property investments and instead, Labour’s focus is on the larger scale buy to let investors. Looking at the stats, and being generous that we are only looking at landlords with 6 or more (not the couple that Mr McConnell suggested) ……
Of the 17,203 rental properties in Luton, 4,696 are owned by Luton landlords with 6 or more properties in their portfolio
To target these larger scale landlords, who would unquestionably leave the property market in their hordes if their buy to let investments could be so easily destabilised. There would be mass sell offs before the legislation became law, thus making the tenants homeless (and who would house them??) ..and even if that didn’t happen, it would be very damaging and someone (probably landlords) would have to stump up the £48.54bn national bill (£249,194,180 in Luton alone).
If Labour want to fix the property market, it needs long term certainty and confidence, yet even these revised policies would instantly challenge this
And don’t think I am just Labour bashing here as the Tory 2014 Help to Buy scheme hasn’t really helped either as their scheme which gave first time buyers (FTB) a 20% interest free loan, if they put down a 5% deposit, has been a boon for new home builders.
The Tory’s announced recently another £10bn of taxpayer’s money will be pumped into a scheme which, quite frankly, wasn’t needed to boost an already decent property market. The banks were already giving 95% first time buyer (FTB) mortgages from 2010 and the Help to Buy scheme was only allowed on new homes purchases, meaning it didn’t help the larger second-hand market. That £10bn could have been better spent building Council houses, not helping the large plc builders line their pockets with Government cash.
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In this week’s article on the Luton property market, we consider if the large number of new homes being built locally have enough bedrooms to meet the demand and how that will affect the overall Luton property market both now and in the future
The British housing market has never been so newsworthy. Every other day, there is an article in the newspaper or online about impending house price drops, house price rises, building on green belt, mortgage rates up/down, first time buyer affordability and the woes of being a buy to let landlord, to mention but a few. As a nation, we have a strong national desire to be homeowners.
The English Housing Survey stated the proportion of owner occupied households increased steadily from 52% in the early 1980s to 2003 when it reached its peak of 71%. Since then, owner occupation gradually declined to 63% in 2014, yet in fact increased to 64% in 2017 and has stayed there since.
One of the main motives of home ownership is the prospective tax-free capital appreciation that can be obtained. It’s no wonder the phrase ‘as safe as houses’ is popular in the English language, as many homeowners use homeownership as a nest egg or even a pension pot, as savings rates are at extraordinarily low levels.
Yet even with the news that homeownership is on the rise, the biggest seismic shift to the Luton property market is the growth of the rental market, which has more than doubled in the last 15/20 years. So how can the social housing sector (Council Housing) remain roughly at the same level since the millennium, homeownership slightly grow, yet the private rental sector be so huge? Well it comes down to the fact that many more homes have been built in Luton in the last 15/20 years, and a lot of them have been bought for buy to let, or Luton homeowners with second hand starter homes have also sold them to buy to let landlords and they have bought larger brand new homes.
Yet the question we wanted to ask is ... are we building the right sort of homes, especially when it comes to the number of bedrooms? Whilst the data doesn’t exist for Luton, the country’s stats are available and it makes fascinating reading...
Looking at the graph in 2008, 59% of new homes built were one and two beds, yet last year that had dropped to 35%.
The Housing Minster said recently he was concerned that new homebuilders were building the wrong types of homes in the wrong places at the wrong prices. Many (not all) tenants are tenants because they can’t afford the deposit and as there is a direct coloration between the rent’s landlords charge and tenant’s earnings (i.e. as earnings go up, rents go up and vice versa), and earnings for the last seven years have been subdued, the property tenants have been able to afford in Luton are the smaller one and two bed properties. Yet a lot of these tenants are now having families (with the need for larger property with three, even four bedrooms).
Looking at the stats for Luton, it can be seen the vast majority of homeowners live in the larger properties with more bedrooms, whilst private rental tenants are in the smaller properties (with less bedrooms).
Our concern is - will young families and professionals be able to afford to live and work in Luton, especially as the local authorities are unable to build council housing (aka Social Housing)?
One symptom of all these issues mentioned above is the massive growth in multi-family households (i.e. households containing two or more families), which have increased by 42% in under a decade. Now of course many will be because of older couples moving in with their adult children yet many are unrelated families sharing a house, something that simply shouldn’t be happening in 2019.
If we don’t increase the supply of the ‘right’ sort of homes, what will their living conditions be like?
Whilst we are still a country of homeowners and even though there has been a slight growth in numbers, the long term trend is downwards if we don’t build enough of the ‘right’ new homes, in the ‘right’ location and the ‘right’ price, Luton people will continue to increasingly rent ... which is only good news for Luton buy to let landlords.