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Fewer arrears for tenants in UK as jobs market improves
Fewer tenants in the UK are falling into serious rent arrears thanks to the improving employment market and landlords are benefitting from healthier tenant finances, according to the latest lettings agents report. In absolute terms, just 86,200 tenants across the UK are more than two months behind in their rent in the first quarter of 2016 compared to 89,300 in the previous quarter, a fall of 4%. The data from the report from Your Move and Reeds Rains also shows that just 1% face serious arrears and for landlords there are the fewest buy to let mortgage arrears since 2007. Since 2008, there have been on average 92,600 tenants in serious arrears in the first quarter of each year meaning that the first quarter of 2016 is also substantially lower than the long term average. ‘Fewer tenants in serious arrears reflect the health of the jobs market. With an extra 44,000 jobs created in the first quarter of this year, thousands of tenants have been able to get their finances back on track and pay down late rent,’ said Adrian Gill, director of estate agents Your Move and Reeds Rains. He explained that serious rent arrears peaked in the third quarter of 2012 when 124,800 households owed more than two months’ rent and when unemployment in the UK stood at 7.9%. Since then a boom in employment has been responsible for lifting many of the most precarious tenant households out of serious rent arrears and onto a more sustainable course. The direction of travel looks very positive. ‘A reduced risk of serious rent arrears will be welcome news for existing landlords, facing so many artificial challenges posed by government meddling. But no one should be complacent as managing a property is never simple. Some landlords are being held back from buying property by the Stamp Duty Surcharge. If this stems the flow of new homes into the rental market, then shortages in some areas could push up rents and hitting affordability,’ Gill pointed out. The number of tenants more than two months behind with rent has fallen by 16% since the eve of the financial crisis and recession in the second quarter of 2008 from 102,900 to today’s total of 86,200. This is despite the expansion, over exactly the same period. At the start of this period, there were 3.6 million households living in the UK private rented sector. Now, after just eight years, this has grown by 62% to reach a total of 5.8 million households as of the first quarter of 2016. ‘The massive growth in the number of homes available to rent, driven by both deliberate landlords and accidental landlords coming into the market, has ensured that rents have not outpaced the ability of tenants to pay. The affordability of renting and the number of tenants falling behind on rent also needs to be seen within the context of… Continue reading
New research shows the worst rates of negative equity in the US
As the housing market continues to recover in the United States, home owners who are underwater on their mortgages are increasingly concentrated in the Rust Belt, according to the latest real estate report. The data from the Negative Equity Report from real estate firm Zillow also shows that West Coast home owners are less likely to be in negative equity. Nationally, 12.7% of home owners with a mortgage were in negative equity, meaning they owed more on their mortgage than their homes were worth. However, negative equity is down from a peak level of 31.4% in the first quarter of 2012. For years, Las Vegas has been the prime example of the housing bubble and bust, with nearly three quarters of mortgaged home owners underwater when the market bottomed out in in the first quarter of 2012. But Chicago now has the highest negative equity rate among large US markets, surpassing Las Vegas in the first quarter of 2016. At its worst, Chicago had a 41.1% rate of negative equity, but its recovery has been sluggish and the negative equity rate has declined more slowly than elsewhere. As the housing market recovered, the distribution of underwater home owners across the country has shifted. In the first quarter of 2012, the West Coast, Southeast, and Rust Belt regions had a disproportionately greater share of underwater home owners. For example, the Southeast had 20.4% of homes with a mortgage, but 24.9% of homes in negative equity. Four years later, the West Coast, home to hot markets like the Bay Area, Portland, and Seattle, has only 10.2% of home owners with negative equity, but 15.2% of all mortgaged home owners. The imbalance was worst in the Rust Belt region, which includes Wisconsin, Illinois, Indiana, Michigan and Ohio, and which had an unevenly large share of underwater home owners. ‘When the housing bubble burst, the West Coast had more than its fair share of underwater homeowners. But the strong local economy and job markets have significantly helped these housing markets recover, and several are now more expensive than they were during the housing bubble,’ said Zillow chief economist Svenja Gudell. ‘Other parts of the country didn't get those same benefits, and until market fundamentals improve, home owners and buyers in these areas will be facing disproportionately higher levels of negative equity as they navigate the housing market,’ she added. The data also shows that four of the 10 metros with the highest rates of negative equity are in the Rust Belt. Meanwhile, the West Coast is home to five of the 10 metros with the lowest levels of negative equity. Continue reading
Investment in rural land in the UK seeing weakening returns
A weakened investment performance suggests that confidence in the rural land market in the UK is cooling after years of great returns. The IPD UK annual rural property index shows that total return recorded in 2015 was 5.5%, down from the 10.4% recorded in 2014. It is the most subdued return since 2008 and reflected a market cooling after several years of very robust returns in line with other investment classes. Sentiment was tempered by weakening commodity prices, and more recently by political discussions around Britain exiting the European Union. The report says that this caution around future market uncertainty was most reflected in rural land capital growth, which slowed to 4.1% in 2015 from 8.9% in 2014. This marked the lowest growth since 2008 when values depreciated. The decrease in the rate of capital growth contributed the most to the decline in the total return. The restraint in capital value growth was most pronounced in South East, where growth declined to 5.8% from 17.9% in 2014. There was also significant moderation in capital value growth across Eastern England, East Midlands, and Yorkshire and Humberside regions. Northern England and Scotland recorded the slowest value growth at 1.1%. Rural income return, however, held relatively steady at 1.3% compared to 1.4% in 2014, the figures in the annual index also show. ‘The weakened investment performance suggests confidence in the land market is cooling down after years of great returns,’ said Colm Lauder, MSCI vice president. ‘Moreover, the uncertainty created by discussion over Brexit and the potential effect of such a move on agri-food exports hit the confidence of farmers to increase rental holdings or invest further,’ he explained. He added that investors were concerned that it will be some time before there is a clear picture for the agricultural economy. MSCI also recorded a total return of 10.8% in 2015 in the IPD UK Annual Forestry Index, which marked a decline from a total return of 18.6% in 2014, the most subdued return since 2008. The index report points out that the decline is despite healthy demand for timber and wood products. However, a strengthened pound sterling versus euro and Scandinavian currencies put British wood products at a disadvantage in export markets. And it explains that British timber is heavily dependent on the exchange rate value of the pound. The significant gap between Euro and Swedish Krona denominated import prices and home grown prices denominated in the British pound narrowed significantly, which rendered Scandinavian exported sawn timber more competitive in 2015. Consequently, imports from mainland Europe rose at the expense of UK timber growers, whose timber sale returns in turn declined due to weakening saw-log prices. Subsequently the medium term run of forestry property price returns were impacted as investors and analysts made the adjustment. ‘The total return from UK Forestry of almost 11% is… Continue reading
