Reluctant landlords leaving the market

New research from the Association of Residential letting Agents (ARLA) suggests that so-called 'reluctant landlords' might become a thing of the past.

The term was coined for those who decided letting their property because it could not be sold. ARLA members have reported a decrease of 5% in properties being let because they couldn't be sold over the last three months, bringing the total figure of 'reluctant landlords' to 21% of the residential property market.

The numbers are even more impressive when we compare them to last year's when ARLA members recorded that up to 42% of landlords had entered the market as a last resort.

ARLA's Managing Director, Ian Potter, puts some of these developments down to the increased activity in the residential sales market which will have caused a number of people to leave the lettings market and sell their property as originally planned.

The developments mean that competition for great value rentals may increase over the next few months. However, in our experience many reluctant landlords have not only been reluctant to enter the lettings market, but in many cases their properties have not necessarily been the most desirable for potential tenants.

This is not about properties not being looked after, it's simply the difference between a property bought with its potential as a rental in mind and a property bought as a family home. In Edinburgh, residential lettings have traditionally been strong. Especially sought after are larger, traditional tenements in areas popular with students. Whilst there is some competition over the more popular ones and viewings are usually very well attended, students do find somewhere suitable to live - although they may have to compromise on location at times.

Are your properties safe?

It's Gas Safety Week this week, an opportunity to remind landlords as well as home owners to look after their gas appliances.

It's all too easy to assume that cookers and boilers will work year-in, year-out and many of them actually do function faultlessly. But think about it like this: you wouldn't skip your car's MOT - it's equally important to have gas appliances checked annually to ensure they are working correctly.

According to research conducted by Gas Safety Week's organisers, 43% of Britons don't have their appliances checked regularly and 10% own appliances that have never been checked. Quite a disconcerting statistic.

For our landlord clients, we arrange annual checks with registered gas engineers as part of our comprehensive landlord services. If we source an investment property for you, manage its renovation and let it out, we also make sure that all relevant checks are completed before your first tenants move in. After that, annual checks are scheduled to ensure both your investment and the tenants are safe.

Whilst we are lucky to work with a trusted supplier who are registered 'Gas Safe' engineers, if you need to look for your own engineer, make sure to select a reputable company that will carry out checks carefully and thoroughly. More information can be found here.

First landlord charged under new tenancy deposit rules

Earlier this week, an Edinburgh landlord was the first one to be ordered to pay his tenants three times their deposit under tenancy deposit regulation brought in last year. The Scotsman's property supplement comments on the ruling today.

The new government regulations, designed to weed out so-called rogue landlords and ensure the fair return of deposits at the end of a tenancy, entitles a tenant to receive three times the amount of the deposit should they discover that the landlord did not place the money in one of the government-approved schemes.

Was this particular landlord a 'rogue'? We don't know. One thing this ruling has made clear is that all landlords need to be aware of the rules and regulations they have to adhere to. Whilst tenancy deposit schemes were introduced gradually, there was relatively little coverage in the mainstream media and the government did not run a large-scale information campaign. For those reasons, it's entirely possible that landlords - especially those who self-manage and are 'only' renting out a flat because they can't sell it - didn't know about the regulations.

Whilst not intentionally 'rogue', they may inadvertently find themselves on the wrong side of the law. This recent ruling spells good news for tenants as it makes it absolutely clear that the courts will find for them if landlords break the rules. For landlords, it shows that breaching existing regulation will not be taken lightly, which is definitely a step in the right direction: with very effective rules in place, it's up to the authorities to enforce them. The result will be increased fairness for tenants and those landlords who are happy to stick to the rules.

Student property investors buoyed by Moody's rating

Moody's Investor Service recently awarded a long-term A2 rating to bonds issued by Holyrood Student Accommodation Plc, showing the agency's confidence in student accommodation in Edinburgh.

Whilst the details of the rating are explained here, there are a number of obvious developments that have made the city a favourite with both students and investors for years, some of which have been mentioned in this blog before.

Take the reputation of Edinburgh's universities, for example. They are among the UK's leading academic institutions with a number renowned worldwide and notoriously hard to secure a place at. Accordingly, there is competition to study in the city and, whilst the universities themselves continue to grow, so has the student population over the years.

Many of Edinburgh's students are looking for good quality accommodation in convenient locations. Once out of halls, many want to share flats with friends and spacious, traditional tenement flats have long been a favourite. They continue to be snapped up year after year, yielding a net rental return of over 7%, on average.

At the same time, buy-to-let (BTL) mortgage finance has made a return this year with more products available at competitive rates. Metro Bank's latest offering is only one example.

For more detailed information, read our case studies or get in touch.

Edinburgh beats London property

One of the biggest attractions Edinburgh property holds for investors are reasonable property prices, allowing relatively easy access to a good choice of high quality flats or houses. In fact, many of our investor clients tell us that -  apart from average net rental yields above 7% - it's this accessibility that attracts them to the Scottish capital.

Their alternative? London has continuously shown high demand for rental property, both from tenants as well as investors. However, in many cases the rental yields don't match Edinburgh's and the amount of cash required to invest has certainly made buyers think twice.

Research from estate agents Knight Frank is now backing up our anecdotal evidence that investors are starting to think twice about spending their money on London property as 'buyers are becoming more resistant to continued price rises'.

Whilst buyer interest is still growing slightly, it has certainly slowed down at the top end of the market, for properties worth more than £5 million. At the same time, rents for prime central properties have fallen slightly, by 1% since the start of this year.

By comparison, Edinburgh rents have remained stable or grown, depending on the size and location of the individual property. For a better idea of Edinburgh investment opportunities, click here, or contact us directly.

Asking prices, mortgage lending and availability - all on the up

It's been a flurry of good (property) news on the Property Reporter website today. It's more than enough to give you a bit of a round-up here and all down to increase confidence in the property market.

Asking prices for properties for sale are becoming more steady, with less of them being dropped by sellers looking to move a flat or house. In fact, Edinburgh showed the second-lowest proportion (after London) of discounted properties in the UK with only 27.7% of properties for sale having their price dropped. This is compared to a much higher national average of 32%, which fell from 37% last year. On average, property prices are being reduced by just over 6%, down from 7.6% last August.

Altogether, the trend is pointing towards a growing confidence in sellers, who appear to be happy to wait for the right buyer to come along and pay a price they are happy with.

At the same time, things are starting to look up for first time buyers as gross mortgage lending hits nearly a five year high at an estimated £16.6 billion in July, a 29% on last year. In fact, it is the highest estimate the Council of Mortgage Lenders (CML) has published since October 2008. According to the CML, the increased lending activity is down to stronger housing and mortgage markets as well as falling interest rates on fixed rates due to the Funding for Lending scheme.

Having said that, those looking for a mortgage also have a lot more choice than they would have had even a year ago. Last month, more than 10,000 mortgage products were available to consumers, the highest number since September 2010. The typical home buyer borrowed just under £160,000, a slightly increased loan to income ratio.

In our opinion, all three of these stories reflect a growing upwards trend in the property market. For those looking to invest, this is a great time with plenty of choice of mortgage products available and property prices still stable. At the same time, despite the number of mortgage products increasing, many still require a sizeable deposit which will keep a large proportion of people in the rental market for years to come.

Low interest rates for 3 years, but is now the time to buy?

The Bank of England’s (BoE) new Governor, Mark Carney, has announced his first ‘forward guidance’, saying that the Bank ‘will not even think of raising interest rates’ until UK unemployment drops below 7%. The rate is currently 7.8%. The BoE envisages that this will take about three years to achieve.

For potential property investors this means three years of financial stability, making residential property once more a low-risk investment. Add to this the net rental yields investors and landlords can currently achieve – on average around 8% on Edinburgh student rentals – and it’s easy to see why we have seen more interest and commitment from investors in the past six months than we have in years.

Looking at Cullen Property’s investor clients, shows of interest have increased markedly and we have purchased more than £1.1 million worth of residential property in the last month alone.

There’s no decent investment without risk, I hear you say. And what happens if the interest rate goes up sooner than envisaged by the BoE? After all, the bank did include a few ‘get out’ clauses in its guidance, as discussed in today’s Scotsman newspaper.

Whilst the BoE may interest rates sooner, Carney has made it clear that this would only be the case if the UK’s GDP increases and inflation rises. In other words, the economy would have to be doing better, thus allowing for unemployment rates to drop at the same time.

If that were to happen, not only would investors see their interest rates go up, but the rents achieved by their properties would follow.  It is also likely that the housing market would be improving along with the wider economy, bringing with it capital growth.  A win-win situation.