Investment
UK seeing a crisis in private rented sector due to tumble in landlord confidence
Landlords’ confidence in the buy to let sector in the UK has collapsed to an all-time low and is now worse than levels witnessed during the financial crash, according to the country’s biggest landlord association. Richard Lambert, chief executive officer of the National Landlords Association (NLA), told delegates at the Building Societies Association’s (BSA) annual meeting for mortgage professionals that the situation is worrying. He explained that confidence in landlords’ business expectations has tumbled by more than a third over the past year, down from 67% to an all-time low of 43% and the current level of confidence in the sector is now 5% lower than levels witnessed after the financial crash in 2007. He pointed out that the actions taken by the Chancellor in last year’s Summer Budget and Autumn Statements has led the NLA to reverse its previous prediction of the continued growth of the private rented sector (PRS) by another million more households over the next five years. It now forecasts that, if landlords follow through on their intentions, there will be a dramatic sell-off of 500,000 properties in the next 12 months, followed by another 100,000 sold each year to 2021. The net effect will be that the PRS be smaller by up to 136,000 properties. The data, from the latest NLA quarterly landlord panel survey, also shows that the proportion of landlords looking to sell in next 12 months has more than doubled since July 2015, up from 7% to 19%. Over the next few years some 28% of landlords don’t plan purchase any more properties, 10% plan to reduce their portfolio and 5% plan to sell up completely. ‘Two speeches from the Chancellor in 2015 have led to a crisis in confidence greater than when all but a few buy to le products were immediately withdrawn from the market following the 2007 financial crash,’ Lambert said. ‘Up to half a million properties could come onto the market as a result of the Summer Budget and Autumn Statement, which the Chancellor will no doubt deem a success. But there is no guarantee that these will be the one or two bedroom flats or small houses that will appeal to first time buyers, especially as landlords are more likely to offload less desirable stock in less desirable areas,’ he explained. ‘We’ve always said that Mr Osborne is blinded to the impact of his decisions by his commitment to homeownership. He may have intended to focus on the small scale part time investor, but it’s the larger and more professional landlords who will be hit worst by cuts to mortgage tax relief and increases to stamp duty, and who appear most likely to leave the sector,’ Lambert told the meeting. ‘What happens to the people these landlords house if they still can’t buy and there are fewer and fewer properties available to rent?’ he added. Continue reading
Draft code of practice for lettings agents released in Scotland
The Scottish Government have released a draft code of practice for letting agents which will mean a huge shake up in the industry before it comes into force in 2018. The Letting Code of Practice (Scotland) Regulations 2016 has been structured in eight sections to mirror the lettings process and sets out the standards expected of letting agents operating in Scotland in how they manage their business and provide their services. It covers key areas such as standards of practice, engaging landlords, lettings, management, maintenance, ending tenancies, communications, complaints, deposits and insurance. Under the code Scottish ministers will establish and maintain a register of letting agents. The regulations will also allow them to remove a letting agent from the register if they are no longer ‘fit and proper’. The Association of Residential Lettings Agents (ARLA) welcomed the introduction of a statutory code of practice for letting agents and said that it will help to further professionalism in the industry and drive up standards. ‘We contributed to the Scottish Government’s consultation on the code last year and we are pleased that they have taken on board a number of our recommendations over procedure and wording,’ said ARLA managing director David Cox. ‘It is also very pleasing that the code has a requirement for agents to have professional indemnity insurance and client money protection. These are two requirements of ARLA membership and mandatory CMP is something we are campaigning for in England to provide greater protection for landlords and tenants if things go wrong,’ he explained. But ARLA believes that there should be more detail about what agents should do if disputes occur around tenancy deposits. This is because an agent may be required to co-operate with any investigation by an independent body if a dispute is raised between either the landlord or tenants and this is not always clear in the relevant scheme’s rules for disputes. ‘On the issue of training and qualification ARLA has long campaigned for greater regulation for letting agents and believe that mandatory qualifications will promote professionalism and basic standards within lettings that will benefit businesses and consumers. We look forward to seeing more detail from the Scottish Government in this area,’ added Cox. Kaira Massie, solicitor in the Law Society of Scotland’s professional practice team, said that there has been very little scrutiny of letting agents until now and having a new, statutory code of conduct will improve the situation for both landlords and tenants. ‘Solicitors in Scotland are already subject to stringent rules of admission and detailed practice rules covering professional ethics and conduct and many other aspects of practice. While solicitors will still be subject to the new letting agency scheme, there will be less duplication than was in the original proposals,’’ she pointed out. We’re pleased that the Scottish Government has considered many of the points we raised. The regulations now take into account that solicitors are required to have indemnity to… Continue reading
US home foreclosures continuing to fall, latest data shows
Foreclosures in the United States are continuing to decline with the latest data showing they fell 30% in December year on year, the sixth consecutive month with an annual decrease in foreclosure starts. However, the figures from real estate data firm RealtyTrac also shows that bank repossessions (REOs) in December increased 65% from a year ago, the 10thconsecutive month with an annual increase in REOs. ‘In 2015 we saw a return to normal, healthy foreclosure activity in many markets even as banks continued to clean up some of the last vestiges of distress left over from the last housing crisis,’ said Daren Blomquist, vice president of RealtyTrac. ‘The increase in bank repossessions that we saw for the year was evidence of this clean up phase, which largely involves completing foreclosure on highly distressed, low value properties,’ he explained. ‘Meanwhile, local economic problems became a larger driver of foreclosure activity in 2015 Examples of this are Atlantic City, New Jersey, which posted the nation’s highest metro foreclosure rate for the year, along with several heavy oil-producing markets in Texas and Oklahoma where foreclosure activity increased in 2015, counter to the national trend,’ he added. Counter to the national trend, 24 states and the District of Columbia posted an increase in foreclosure activity in 2015 compared to 2014, including Massachusetts up 55%, Missouri up 50%, Oklahoma up 36%, New York up 24% and Texas up 16%. Among the nation’s 20 largest metro areas, six posted year on year increases in foreclosure activity in 2015. In Boson they were up 44%, up 38% in St. Louis, up 25% in Dallas, up 22% in Detroit, up 9% in New York and up less than 1% in Houston. A total of 569,835 properties started the foreclosure process in 2015, down 11% from 2014 and down 73% from the peak of more than 2.1 million foreclosure starts in 2009 to a 10 year low. Bucking the national trend, foreclosure starts increased in 2015 in 16 states, including Oklahoma up 92%, Massachusetts up 67%, Missouri up 28%, Virginia up 23%, Nevada up 14% and Arkansas up 14%. A total of 449,900 properties were repossessed by lenders in 2015, up 38% from 2014 but still 57% below the peak of nearly 1.1 million bank repossessions (REOs) in 2010. The median price of a bank owned home in 2015 was 41% below the median price of all homes, the biggest bank owned discount nationwide since 2006. ‘That may be surprising to some, but demonstrates that in a healthy real estate market foreclosures are no longer mainstream, but instead are back to being a market niche of properties with problems that many buyers do not want to tackle,’ said Blomquist. Bank repossessions (REOs) increased from a year ago in 41 states and the District of Columbia. Some of the biggest increases were in New Jersey which was up 226%, New York up 194%, Texas up 115%, North Carolina up 108%, and Oregon up 96%. Foreclosures in… Continue reading
