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TODAY'S OTHER NEWS

Rents edge up amid increase in demand from renters

The number of tenants experiencing rent rises hit yet another record high in August, the latest ARLA Propertymark PRS report shows.

The trade body for letting agents report that 64% of its members witnessed landlords increasing rents in August.

Rents are rising on the back of greater demand from prospective tenants, with the number of house hunters registered per letting agent branch rising to 76 on average, up from 73 in July.

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Letting agents had an average of 199 properties under management per member branch in August, up from 184 a month earlier, but still not enough to meet growing demand from renters.

David Cox, ARLA Propertymark chief executive, said: “Although it’s positive to see that supply has risen, it is nowhere near enough to counterbalance the rapid pace of rising rents, which have reached a new record high for the fourth month running. Two thirds of agents reported landlords raising rents last month, which is a significant increase when compared with the two fifths of agents who witnessed rises in August last year.”

“Unfortunately, the impact of the Tenant Fees Act will continue to be felt by tenants, as in order to keep their heads above water landlords will need to continue increasing rents to cover the additional costs they now have to bear.”

 

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    Rents up, or just trying to cover additional landlord costs ?

  •  G romit

    Well there's a surprise.

    Anyone with a single iota of commonsense (which obviously excludes politicians) could see increasing Landlords costs would increase rents and drive some Landlords out of the PRS exacerbating a rental property shortage and drive rents up further still.

    But there's worse to come still with abolition of Sec.21 in the pipeline, and rumours of further attacks on Landlords in the future.

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    Tenant Fees Act + Section 24 = Rent Increase

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    • 02 October 2019 18:41 PM

    It comes to a point when tenants won't or can't pay the rent increases required to maintain a property viability.
    Tenants are not able to meet these increased rents and therefore have to vacate.
    This leaves the LL with an effectively unviable rental property.
    Unless a LL is able to increase rents to cover the increased cost burdens then it is pretty pointless the LL retaining the affected property.
    Previously LL may have subsidised such properties on the basis of hoped for CG.
    This prospect is now extremely unlikely for at least the next 10 years.
    So with even the prospect of CG removed it is pretty pointless a LL retaining such an unviable property.
    This unviability is based on how things are now.
    There is the very likely prospect of even more cost burdens being imposed on LL which makes properties even less viable..
    In such circumstances it makes no business sense for LL to retain such properties.
    Selling therefore makes eminent business sense.
    At some point there won't be sufficient available rental properties for tenants to go to as those LL will have sold up due to unviability.
    I am experiencing this scenario and will be selling a such a property.
    It seems a tipping point has been reached beyond which tenants are not prepared to pay increased rents to cover increased costs and that doesn't even include an annual RTI.
    We haven't even factored in potential IR increases.
    For those LL with mortgages at about 75% LTV such properties are becoming unviable as the additional cost burdens are imposed.
    Reducing gearing is an option to retain viability but not every LL is in a position to do this.
    There are so many good reasons to sell up now and very few to remain a normal mortgaged AST LL.

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    It is near to impossible to raise rents where I am, to cover increased costs.
    Tenants simply just don't have the money.
    Despite property prices increasing in our area by around 33% the rents are the same as they were around ten years ago and sometimes less.
    I am lucky that I own all my properties outright, otherwise I would be struggling to make ends meet.

     
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    A real life example. Dubai. When the first buildings were completed rents were sky high as very little inventory. Tenants out bidding etc. The moment more buildings completed creating choice rents went down. Over supply creates very low rents. Parliament - You know what you have to do. Hassling LL only kicks the can down the road.
    Heres a prediction in next three years - Rental property scarce. Only LL with small mortgages left in game. -Instead of the 20-25 enquiries I'll get 50 upwards.
    Overcrowding, Tenants with poor history get to live in caravans & tents, Bribes,brown envelopes offered to LL/Agents to secure properties over other enquires. Tenants chosen who have some DIY skills that promise to maintain the property at their expense.
    Thats a prediction if nothing changes & a guarantee if Labour get in.

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    • 02 October 2019 19:23 PM

    Yep agree with your contentions.
    Lower gearing will be the only way LL could retain viability.
    They won't be any better off just maintaining viability.
    Without all the existing bonkers cost burdens viability would have remained.
    For most LL to maintain viability reducing gearing is the only realistic way taking into account that rent increases of sufficient amounts aren't achievable.
    Selling property will be the only way for most LL to produce the cash to reduce leverage on their remaining rental properties.
    But of course selling is not even a viable option for many LL due to locked in CGT liabilities.
    Such LL are between a rock and a hard place.
    It could be that they are forced into subsidising the property there being little alternative unless they are able to squeeze more rent out of tenants which doesn't seem to be achievable.
    It is a real conundrum.
    I would suggest that many LL are technically bankrupt and as these cost burdens increase if LL are unable to subsidise they will be bankrupted.

     
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