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Developers struggling to meet demand for luxury homes in London
The number of luxury homes currently being planned or under construction in London hit a record high this year, with around £60 billion of properties currently due to be delivered over the next decade. This is a 20% increase on 2013. However, with significant capacity issues at every level of the capital’s construction industry, a huge proportion of these properties are unlikely to be built on time, according to a new report from EC Harris. It reveals that this year, the capital’s 10 year pipeline of high end property has grown by around a quarter to a record 25,000 homes. However, with developers and investors struggling to keep pace with seemingly insatiable buyer demand, up to half the new homes planned in the next five years could end up falling well behind schedule due to a lack of available contractors to deliver the required quality of work. ‘With the UK economy back on track and London deemed a safe haven for international property investors, it’s not surprising that demand for luxury homes is fuelling ever increasing development,’ said Mark Farmer, EC Harris head of residential. ‘Where we are starting to observe real problems, though, is in the construction process. There is simply not the capacity out there to meet demand and many projects will undoubtedly fall by the wayside or experience delivery difficulties due to sheer lack of resources,’ he explained. ‘Many developers and investors, when in a position to do so, are therefore looking to jump the queue and are paying premiums for construction so they can deliver on promises they have already made to their purchasers,’ he added. In terms of location, the South Bank is proving the most popular area of the capital for development, accounting for around a third of new projects. This is closely followed by Chelsea and Fulham and the City. The report points out that the appetite for high end residential property continues to reach well beyond the traditional West End heartland, with high profile developments such as One Blackfriars and Bishopsgate’s Heron Plaza demonstrating the spread into a much broader swathe of central London. Therefore, to avoid losing out on investment returns in the current strong sales market, some developers are being forced to pay premiums to contractors in order to secure their services. It concludes that this rush to market has provoked significant price inflation in the construction sector as developers seek to urgently get building work underway with the best available tradesmen and project delivery expertise. Continue reading
Survey suggests being a landlord is more stressful than it used to be
Being a landlord in the UK is becoming an increasingly stressful business with over half using their holidays to sort out issues, new research shows. Some 25% have found being a landlord more stressful than they had expected and 67% said they were more stressed than 12 months ago, according to a survey by UK Landlord Tax. The survey showed that 53% of landlords use up to 20% of their annual leave sorting out issues with their properties. Also 46% of landlords spent up to 20 hours a year on phone calls, negotiating with agents and tenants as well as sorting out insurances, house repairs and maintenance. Other contributing factors included late rent payments (58%), funding property maintenance and repairs (40%) and tax worries (38%). Expat landlords feel under the most pressure with 86% worried about the potential changes to personal allowance entitlement. However, those who had been landlords for 10 years or more felt under least pressure. Other issues and worries for all landlords included properties lying empty with no tenants in place (35%), not having enough time to deal with issues at the property due to work constraints (28%) and expensive agency fees (15%). Four legged friends were another ‘pet hate’ landlords had to tackle. While 60% of those surveyed said they don’t currently allow pets in their property, 5% discovered at the end of the tenancy that their tenants had been keeping pets without consent, and experienced some level of damage to the property. While 74% of those surveyed said they had no plans to stop letting out their property in the next 12 months, 51% said they didn’t expect to make any money in that time either. This ties in with figures from the National Landlords Association which revealed that 27% of landlords who let out a single property break even or run at a loss, meaning just a few unexpected expenses can leave them struggling. ‘Following the dramatic increase in landlords in the UK it’s not surprising that they are becoming more stressed. Letting properties is a serious business and with the number of so-called ‘accidental landlords’ increasing significantly it’s no surprise that landlords are feeling the pressure,’ said Simon Thandi, director at UK Landlord Tax. Continue reading
UK landlords predict slower annual rent rises
Landlords in the UK expect rent rises to slow over the next 12 months to below the target rate of inflation, according to a the latest survey from lettings agent network Your Move and Reeds Rains. On average, landlords estimate that rents will increase by 1.8% in the next year. This is lower than the Bank of England’s 2% target for inflation, and would also represent a slowdown on the current pace of annual rent growth. The latest Buy to Let Index from Your Move and Reeds Rains reported that average residential rents across the UK are rising at an annual rate of 2.4%. The majority of landlords polled do not intend to raise their rents in the next year, however 43% expect to raise rents and of those 57% cite covering the cost of inflation as their main motivation. Paying for maintenance work is the second most significant reason, listed by 31% of landlords. Over the last six months, 41% of landlords report seeing a rise in tenant demand. This comes as lettings activity has been growing, with new tenancies agreed across England and Wales up by 6.9% compared to August 2013. Tenant demand has helped reduce average void periods in the private rented sector, ensuring greater stability of income for landlords. In the past year, 18% of landlords have already added to their portfolio of rental properties. This appears to be inspiring confidence among property investors with 21% of landlords believing that now is a good time to invest in buy to let. Of those who report it is currently a prime time to purchase a rental property, 55% cited tenant demand as a key motivation for investment. Attractive property prices are the second biggest driver, reported by 54% of landlords, while 45% pointed to better capital returns on offer compared to other forms of investment. The proportion of landlords who expect tenant demand to increase further now stands at 63%, up from 56% in January. Only 5% of landlords currently anticipate a fall in demand for rental properties over the coming years. As a result, 22% of landlords intend to expand their portfolio over the coming year, an increase from 18% in January 2014. ‘Demand for rented accommodation is climbing, and there’s little sign of this stopping. While Help to Buy and higher LTV lending are enabling first time buyer activity, strong house price growth this year has lifted homeownership a few steps out of reach for many, and the private rented sector remains the safety net supporting those still saving for a deposit. This is in addition to the thousands of people who rely on renting to offer them flexibility and freedom in their working lives,’ said David Newnes, director of Your Move and Reeds Rains. ‘This demand is also powering more supply. Secure house prices and spirited tenant demand are encouraging budding buy to let investors and existing landlords to add to the number of available homes to… Continue reading
