Sunday, 10 January 2010

Interesting to See Private Rentals through a Tenant’s Eyes

I just found what is surely one of the greatest blogs I have ever read in my life. I have heard of RenterGirl before, might have even browsed before but the 5 or 6 posts I just read there, where not only gripping, intelligent meaningful and poignant, but they were darned funny as well -- not many posts actually make me chuckle out loud.

Rentergirl is a blog by a long-term private tenant, who tells her story of experiences with bad landlords and the day to day problems of tenant life.

It was really interesting for me to read it from that side. I am a member of forums like Property Tribes, and most of my Twitter followers are landlords. In fact I have always looked upon property from an investors perspective because writing about that side of property is my job.

By far the key points for me were those of letting agents, many of the landlords I know online seem like really conscientious people, I bet their toes would curl if they knew their landlord was treating the residents of their properties like that.

I am but young and I have not spent very much time in privately rented accommodation, but the one landlord I have had was nice enough, and he seemed very keen to keep me as a tenant because I kept the place nice and paid on time in cash. However, now having read Rentergirl I realise that I have no way of knowing what he would have been like if I had asked about renovations. When I said I was leaving he offered to reduce the rent, which did make me wonder why he had been charging so much in the first place.

One thing that occurs to me is that landlords are just humans. They are supposed to keep a percentage of every properties value in reserve for repairs, but they are just as prone to face financially difficult times as any of us, at which point

Monday, 21 December 2009

Local Housing Allowance: Another Good Idea Poorly Applied

Firstly, sorry for the delay between postings. I just had to put pen to paper on this:

The Local Housing Allowance was, in my opinion, one of the better pieces of housing legislation passed under the current government. Some -- in my opinion too many in my area -- landlords were being prejudicial and discriminatory against housing benefit claimants; tarring them all with the same brush.

Not that I am too harsh on the landlords for this: what they were doing is essentially the same as an insurance company using your credit history to judge the likelihood of you making a claim. None the less it was unfair to those looking for quality rented accommodation -- especially perfectly decent people like a member of my family and their family, who felt the brunt of this once too often.

The LHA was also supposed to allow people to top up their housing benefit to get better accommodation if they so chose. But -- like the Home Information Pack -- the LHA was a good idea poorly applied; giving the money straight to tenants was asking for trouble, and trouble it got as thousands of people simply failed to pass the money on.

The government well, the Department for Work and Pensions is currently in consultations as to how to combat the new problem. They are considering allowing tenants to choose to have the money paid straight to the landlord.

Immediately you could say that this will put tenants right back at square one, faced with the landlord seeing that the money was coming from the housing association. However, the kind of decent tenants, like the aforementioned member of my family would have no need to have the money paid straight to the landlord, because they would ensure their rent was being paid on time anyway.

So, I am definitely for that option, but again, applied in a better way, i.e. without the choice: any tenants found not to be passing the money on should have it taken and paid straight to the landlord, everyone else should be left alone.

Monday, 26 October 2009

Are Buy to Let Landlords Buying Property Again? Yes and No

I just read a great Citywire article titled, Buy to let: Who Do You Believe? The article was about the recent survey of residential landlords conducted by the Association of Residential Lettings Agents, or rather the conclusions drawn from the collected responses.

ARLA says that its findings mean buy to let landlords are buying again, while Citywire (courtesy of Lorna Bourke) says otherwise. Here is a balanced look at their arguments so you can decide for yourself what is going on with the buy to let market.

The ARLA survey found that the average number of properties owned by residential landlords had increased from 6.4 in March this year, to 7.5 in June, before falling back to 7.0 in September.

ARLA says: this indicates that residential landlords have been buying property this year

Citywire says: this is more likely a reflection on the number of novice 1 and 2 property owners who have been repossessed since the onset of the downturn.

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It is not that easy. Yes, the credit crunch and ensuing recession took a scythe to the numbers of speculative new buy-to-letters, who got caught with their pants down, having failed to do proper research and/or borrowed too much. That is for sure.

But many of those repossessed properties were bought by -- you guessed it -- buy-to-letters. The auctions were held up and down the UK to sell all those repossessed properties, and the consensus of opinion is that most of the properties were being bought by investors. The reports that I can find also suggest that novice investors were predominant early this year.

This was apparently while old while the old hands waited out the market, foreseeing the flood of rentals that would come as the buy to flippers failed at the flipping.

Another reason why novices outweighed the old hands is that the auctions were primarily filled with cash-buyers, as a lot of well-off mum and dad's took the opportunity to set their career endangered kids up as buy to letters, cest la folie.

See the following articles that back up my assertions on the trends of buy to let buying at auctions:

Excuse the REDC tone, but it is a collection of articles I bookmarked while researching an article on first time buyers buying at auction.

Citywire said that ARLAs other finding, on the increased experience of investors confirms their view; that it was the reduction of 1 and 2 property owners that accounted for the average number of properties owned going up, Citywire says:

Experience levels among property investors have certainly grown with the average landlord having run a portfolio for 9.2 years up from 7.8 six months ago,’ says ARLA.

Landlords cannot possibly have gained 1.4 years experience in six months. The rise in experience in the market are exactly what would happen if the new novice investors who bought city centre flats at the top of the market in 2007 bailed out.

Again I think this is an oversimplified way of looking at it. Sure, the average experience of investors rising like that could indicate a decrease in the number of novices, but it could also indicate a rise in the number of experienced investors. How many buy-to-letters of old will have taken the opportunity to buy repossessed properties at such low prices and restart their land lording operations.

The rise in experience could also be because of the young breed of novice investor using their own marketing methods and not using letting agents.

Maybe one of those reasons explains the rise in experience or maybe a combination of several factors does, the simple fact is that you should not use the experience indicator to tell whether buy to letters are buying, and you shouldn't even try.

So, taking that out of the equation, the reason why the average number of properties owned by buy to let landlords increased is most likely because they were buying repossessed properties at auction. This is confirmed by the fact that the number has decreased more recently as the number of repossessed properties has been decreasing.

This does not mean buy to letters are buying again in the sense that ARLA meant it, but it does not mean that they categorically aren't either, as Citywire would have you believe, so the answer over who to believe is; neither of them.

Thursday, 22 October 2009

Buy to Let Investment Back in Business? it was Never out of Business!

Buy to let is back in business according to the CEO of lettings portal But in the UK, where property is put on such a pedestal, the truth is it never really went out of business.

James Davis founder of Upad has said that now the UK housing market is showing clear signs of bottoming, buy-to-let investors should seize the opportunity to pick up property at heavily discounted prices.

Davis also pointed out that although prices have fallen, first time buyers are still finding it difficult to obtain a decent mortgage -- especially if they don't have a substantial deposit, which many don't. This is leaving many people forced to continue renting. Many more forced renters include those who sold property during the boom to rent for a few months, and have been unable to find a suitable property, or unwilling to buy in a down market.

However, buy-to-let investors face a lot of difficulties in the market that has been left standing after the crunch; perhaps the biggest being lenders' unwillingness to consider the rental income from previous investments as a person's income.

That said: this is likely just another way to restrict lending at a time when banks are trying to repair their balance sheets. So, investors with immaculate credit history and a chunk of equity in their properties should still be able to secure the finance they need.

In all honesty though, buy to let never really went out of business in Britain. We Brits have always put heavy value in property as an investment.

Though there hasn't been a lot of spare cash about, and lending has been restricted, there have still been literally thousands of people at auctions buying distressed and repossessed property to let -- and not all experienced investors. In fact the reports said that it was mainly new investors, having borrowed from the bank of mum and dad to launch their career as a buy to let landlord.

This article in the Guardian shows the level of investors at the first REDC auction in the UK in April, and this article on Write About Property shows that in January most properties being sold in the UK were being sold to new investors. In fact, the slowing pool of distressed and repossessed property for sale as the market recovers, coupled with continually restricted lending, may actually slow buy to let investment.

Thursday, 15 October 2009

UK House Prices, interest from overseas buyers Growing

The Government released its latest figures on UK house prices yesterday, and it was far from containing any surprises.

According to the index, which is compiled by the Department for Communities and Local Government based on mortgage approvals, UK house prices were an average 0.5% higher in August than July. However last August prices were still over 5% higher.
The tri-monthly measure, widely regarded as the less volatile and therefore more accurate recorded a rise of 2.7%, compared to a fall of 1.7% in the three months ending May.

However the tri-monthly measure also recorded growth in the three months ending June and the three months ending July, of 2.6% and 2.1% respectively. For the sake of completeness the monthly rises for June and July were 1.6% and 1.4% respectively.

According to the dealing manager of Moneycorp's private division David Kerns, "housing data is currently showing that UK housing is certainly past its worst," after 5 months of growth, he told Write About Property in an interview. This is just one of the factors that will eventually get behind a recovery in Sterling's value.

As it is at the moment, Sterling's weakness could be a factor in the current house prices rises, because it makes British property very appealing to overseas investors.

Overseas buyers have been very active in the UK market over the past few months, because adding the price drops to the falling price of Sterling has made prime properties up to 50% cheaper than at peak. However, because foreign buyers are tending to buy in cash, then they are not influencing the indices of Halifax,Nationwide or DCLG, all of which are based on mortgage data.

Saturday, 10 October 2009

Looks Like I Was Wrong on Second Dip - Or Was I?

Some pretty important things have happened in the microcosmic world of UK house prices since my last post. Well, they aren't actually important in the traditional sense of the world but they are important to this blog's stream.

Two indices have come out for a start, both Halifax and Financial Times both said that UK house prices had risen in September; Halifax by 1.6% on the month, and FT by 0.6%. This creates the impression that the Land Registry fall in August was a blip, that UK house prices are continuing to rise and that this will be shown by the Land Registry index again in September.

It is easy for me to argue with the Halifax index; they have commercial interests, benefit from positive sentiment and their index is based on mortgage approvals, not sale prices. I can't however argue with the FT index; it is compiled by the impartial Acadametrics, and based on sales registered at the Land Registry, which are collected and compiled almost in real time.

However, still nothing has changed; transactions are still shockingly low and it is only the fact that supply is lower keeping up prices. Whether it is next month or next year, there will be a second dip in UK house prices - mark my words.

Thursday, 1 October 2009

UK House Prices: The Second Dip Begins

Well, the second dip that UK housing market bears (pessimists, people who believe we are in a bear market amid a downturn), including the writers on this blog, have been warning about is here.

The month of August left the bulls (those who believe we are in a bull market, heading upwards, optimists) with nothing to cling to; both the indicators that had turned positive and stirred optimism turned back negative in August.

The Land Registy index -- the most trusted index of house prices in England and Wales -- said that the average UK house price fell by 0.1% in August. Not much of a fall, but coupled with a fall in mortgage approvals in the same month it is a clear sign that the dead cat has stopped bouncing as far as I'm concerned.

The Bank of England revealed that mortgage approvals fell from 52,404 in July, to 52,317 in August. Again, not much of a fall but the BOE itself acknowledged that the current level of mortgage approvals is "well below a level consistent with rising house prices".

To be fair, when prices first started rising after months of falls I said it was an anomaly, a one-off inexplicable rise because of the shortage of data available, so I suppose I should say that this could be a one-off fall in the same vain.

However, when I said that about the rises it was because the other data didn't support house price rises, so now, because the data still indicates a market where prices are falling, and because prices never stopped falling in most of the country, I believe that this fall represents the first of many.