Martin Bull looks at the Spring Budget 2024 and talks about the key elements for the property market, affecting those selling, buying and letting property.
You can see monthly snapshots of the sales and lettings data on our website for Dorking and Leatherhead using the links below:
Dorking
Tel: 01306 406506
Email: dorking@ewemove.com
Leatherhead
Tel: 01372 701702
Email: leatherhead@ewemove.com
The perception has been growing that landlords and the rented sector are an easy target for a government clamouring for headline ‘wins’ on the battle against carbon. Rightly or wrongly, Landlords are seen as an easy target with the perception they have the wealth to afford changes that will improve the lives of their tenants and help the government meet international commitments made. COP27 held in November 2022 in Egypt and more recently, COP 28 which has just concluded in Dubai have resulted in a range of new commitments that need to be turned into action by governments.
None of this is news to landlords, who have long felt somewhat like they are being asked to bear a disproportionate burden of the regulatory changes that are subsequently introduced. But perhaps the landscape is changing? A recent study by British Gas suggests that landlords are becoming more receptive to the idea of investing in improvements to deliver greener technology and more energy efficient homes, in part because of a realisation that investment can deliver financial returns.
With the likelihood that legislative change proposed as part of the Renters (Reform) Bill will impose a new test around market rent, for a landlord looking to command a premium rent, ensuring their property can justify that increase means offering something different – something that provides additional value. We know from our own experience talking to buyers and prospective tenants that energy efficiency and the cost of running a building are factors they consider and as such the direct correlation between energy efficiency and ‘value’ is clear. Consequently, if the ‘market rent’ provisions of the Renters (Reform) Bill do come into effect, we expect to see energy efficiency features in a property used as the basis of justifying higher rental values for specific properties.
Whilst the proposed increase in the minimum required EPC rating now looks like it will not come into effect, good old fashioned free market economies are keeping the issue in focus and may well be the catalyst that makes investment by landlords a proactive decision, not a reactive – and resented – process.
If you would like to know more about the way different energy efficiency measures can add value to your properties, please speak with Graham Faulkner.
Dorking
Tel: 01306 406506
Email: dorking@ewemove.com
Leatherhead
Tel: 01372 701702
Email: leatherhead@ewemove.com
Graham Faulkner
Branch Director
The government has now formally introduced its Renters Reform Bill to Parliament – the first stage in the process of scrutiny that will ultimately lead to new legislation governing the relationship and rights between landlords and tenants. The headlines have been mostly about the removal of no fault evictions (i.e. the Section 21 notice), but is this draft legislation simply a vote-winning exercise for the Conservatives or is it a much needed revamp of a set of rules that were no longer fit for purpose?
Before we consider the merits of this bill from the perspective of tenants and landlords, let’s have a quick recap of what the Bill includes.
A nuance to the reported plans in many articles is that some of the proposed changes are yet to be formally introduced, and when they are, will need separate legislation to bring them into effect. That does of course mean that we may see a staggered implementation of what is being proposed, with the following changes likely to follow at a later stage:
In reality, most landlords treat their investments as a business, conscious that in the longer term, being focused on a few key things will be in their interests. Namely:
In other words, treat people fairly and you should be OK. And in reality, that is what the Renters (Reform) Bill is seeking to achieve. No reasonable landlord wants to evict a tenant for no good reason – and the Bill allows good reasons to prevail. It also takes away the concept of tenancy agreements that must be regularly reviewed. In reality of course, the regular renewal of tenancy agreements was primarily of benefit to a landlord who felt the rent no longer reflected a fair market rate.
The Bill provides a specific procedure for rent increases, so in that sense, landlords still have a route to achieve what they need. Of course there is now the prospect of an independent tribunal to determine what is fair in the event that an agreement is not reached.
This Bill has a long way to go before it becomes law, but given it would appear to be part of an exercise to make the current government more attractive to voters, we can infer that there will be much political will given to making it law by the time our next general election must take place – January 2025. With multiple stages of review to be undertaken, change to some aspects is inevitable, but in our view, what is proposed probably offers a reasonably fair balance in respecting the rights and interests of both tenants and landlords. We will be watching the progress of the Bill with interest.
At EweMove, we have always been very focused on creating a process for managing tenanted properties that is fair and transparent for all parties involved. If you have any questions about what the reforms might mean for your properties, or would like some guidance on whether to expand or divest your portfolio, please do give Graham a call.
Sheep and cats may not be obvious bedfellows, but here at Ewenice Towers in Dorking & Leatherhead we think our furry friends aren’t just good for our own well-being, they can also make financial sense for landlords.
As with so much of being a landlord these days, there are two elements to getting it right – understanding what the law says (and this may well be changing soon anyway) and the way you communicate with and manage your tenants. That change in the law has already appeared in the draft Renters Reform Bill making its way through Parliament and there is strong advocacy for it from both the Dogs Trust and Cats Protection pushing hard for a better deal for our family pets. The Dogs Trust have a great resource for landlords and tenants – www.letswithpets.org.uk – a website packed full of advice for tenants and landlords.
One of their key messages:
“By accepting tenants with pets you can increase demand for your properties and attract long-term, responsible tenants.”
In their report “Purrfect Landlords: A Guide”, Cats Protection look at the difference between landlord perceptions and reality with pets. One point stands out – 62% of landlords worry about damage to property, contents or the garden, but only 17% have ever experienced any such issue. And of course, such damage is almost always addressed by the tenant or covered by insurance.
As a landlord, hearing that message come from an organisation with a vested interest, you may be skeptical. But we firmly believe there is a lot of logic in their viewpoint. Let’s come back to those two elements and consider it purely from a landlord’s perspective.
Right now, you are perfectly within your rights to accept or refuse a pet in any property you make available to rent. The Model Tenancy Agreement was updated in 2021 to remove the blanket ban on pets from the standard contract, but there is no obligation to use that contract. Our policy at EweMove is to adopt a common sense approach to pets, working with our landlords. We use a ‘pet policy’ which clearly sets out what is – and is not – agreed and the obligations of the tenant to be a responsible pet owner. The Renters Reform Bill currently proposes a slight move to a position of giving tenants a right to request a pet in the property, which a landlord could not unreasonably refuse. We suspect belligerent landlords wouldn’t find it too difficult to concoct a ‘reasonable’ excuse to decline the request.
In short, the law does not currently offer tenants much comfort and we doubt the proposed changes will significantly alter the landscape for pet owners.
This is where we think there is a real opportunity for pet-savvy landlords to stand out from the crowd. According to the Dogs Trust, around 40% of UK households own pets. Of course some pets are far better house trained than others, but by and large, pet owners are responsible individuals who care deeply for their furry friends. And with far fewer properties allowing pets, a little thought may turn a pet-loving tenant into a good financial decision.
Here are a few tips to consider:
As we reach the ‘tail-end’ of this article, our final observation is that tenants with pets are much more likely to stay longer-term and be happier generally. That must be good for landlords.
We are certainly asked on a regular basis about properties that allow pets, so why not tap into this growing sector and turn it to your advantage. For more advice on letting your property to a tenant with a pet, give Graham a call.
The rental market remains buoyant but there are signs the mismatch between supply and demand is starting to even out. Only this week, The Telegraph reported that “London landlords could soon be unable to charge higher rents as the capital’s chronic shortage of homes starts to ease.” That is not (yet) the reality in Dorking & Leatherhead, but it’s inevitable that the continuing rise in rental income – and hence yield – will attract new landlords. As it stands though, rental incomes continue to rise locally, but there is an emerging shift in what tenants are seeking.
The latest available figures (July 2022) show an average 12 month increase in rent of 3% in Dorking and 17% in Leatherhead. It’s worth noting that it appears one or two rather large tenancies agreed in Leatherhead have distorted the figures a little, with the average rental for a detached property in Leatherhead currently tracked at over £6,000/month, against c. £1,500 in Dorking and £1,750 in the wider South-East. For all other property types, the latest average rental figures are remarkably consistent in Dorking and Leatherhead:
| Dorking | Leatherhead | South-East | |
| Detached | £1,482 | £6,161 | £1,747 |
| Semi-detached | £1,589 | £1,592 | £1,301 |
| Terraced | £1,258 | £1,350 | £1,121 |
| Flat | £1,115 | £1,256 | £957 |
What we are seeing is some quite localised differences in terms of demand and average rents being achieved. In and around Leatherhead, average rents are still increasing against 1 year previously, but the rate of growth is slowing down. On the other hand, Dorking has been more stable in terms of the position compared to 12 months ago, with a small but gradual increase being sustained for most of this year.
As a landlord, your financial outcome is affected by many different factors with the cost of buying and maintaining the property, set off by the rental income it achieves. In terms of property values, Leatherhead has delivered better growth until more recently, but the slightly more rural aspect and family appeal of Dorking now seems to be giving it the edge on that front. My own opinion is that with the challenges around cost of living increasing, we are going to see demand – both in the rental and ownership sectors – increasingly affected by the cost of occupying a property. A recent survey by Rightmove – The Green Homes Report (July 2022) – highlights an emerging shift in behaviour driven by the changing Government agenda and consumer requirements. A couple of key points include:
Currently, any property with an EPC of ‘E’ or higher can be let without one of the very limited exemptions that are available, but that is expected to rise to ‘C’. No date has been confirmed, but the cost of living pressures and a new government keen to make its mark, may accelerate plans here. If you are expanding your portfolio, this should be a major consideration. (Did you know you can check the currency and rating of the EPC for any property at https://www.gov.uk/find-energy-certificate?)
There are other regulatory and political headwinds that will affect your costs as a landlord. The rules on carbon monoxide alarms change from 1st October in England and 1st December in Wales, and the ‘Levelling Up’ agenda includes major changes on eviction rules amongst other things.
Rents may still be (mostly) increasing, but tenant requirements and the cost of living are starting to have an impact on how quickly new tenancies can be secured. Fallow periods do of course have the potential to make big differences to the overall annual return, so effective and timely management at the end of a tenancy is key. Alongside that, the increasing regulatory burden to landlords means that staying on top of current rules across a portfolio of properties is becoming increasingly complex. There remain good returns to be made for landlords who are able to put the necessary time and effort into planning and managing their portfolios against the backdrop of a shifting consumer, political and regulatory dynamic.
If you would like to discuss the local rental market and the way changing rents affect you as a landlord, owner or prospective buyer of a leasehold property, please do give Graham Faulkner a call.
The current government has made it a centre piece of its levelling up agenda to reform the housing sector in the UK. I touched on this in my previous blog, “Levelling Up – The UK Housing Market”. I doubt anyone would argue that the current situation with surging house prices and a complex and limited private rented sector that is struggling to meet demand is fit for purpose.
There is much in the proposals to be welcomed. Private landlords will welcome the proposed changes to the repossession rules. They are promised effective means to gain possession of their properties when necessary, with the ability to expedite the eviction of those who disrupt neighbourhoods through antisocial behaviour and the introduction of new grounds to evict those guilty of persistent arrears, or where they wish to effect a sale of the property.
The changes are backed up by greater powers promised for local councils to take enforcement action against private landlords that are failing to meet their obligations. In general, the changes proposed in the Renters Reform Bill seem largely positive, and certainly based on objectives that few would be able to object to.
The government has set out 5 core objectives to meet in delivering a fairer, more secure, and higher quality Private Rented Sector. These are that:
The objectives are backed up by a 12-point action plan. The key elements of that are:
You can read the full 12-point action plan here. (https://www.gov.uk/government/publications/a-fairer-private-rented-sector/a-fairer-private-rented-sector#executive-summary)
Perhaps the most controversial element of the proposals. A complete revamp of tenancy law is being proposed, following a rather lengthy consultation on the subject that dates back to 2018. In its document: “A new deal for renting: government response”, the following proposals for a simpler tenancy structure are being put forward:
The exact timing of when the new rules will take effect is entirely dependent on the Renters Reform Bill passing through Parliament. The timing of that is not something I am going to try and predict. But we are promised a minimum of 6 months from Royal Assent to the ‘first implementation date.”. At that date, all new tenancies must be periodic and governed by the new rules. That won’t be in 2022 I suspect, but it may well be in 2023. All existing tenancies with move to the new system on a ‘second implementation date’ that is not less than 12 months after the first one. At that point, there can be no more Section 21 evictions.
This is a major reform of our tenancy laws and the impact will be largely positive. I’m comforted by the fact that there appear to be clear and reasonable grounds to evict tenants in situations where landlords might need to take possession. It should bring comfort to landlords who have suffered at the hands of tenants who have intentionally withheld rent, knowing there is little a landlord can do in the short term. Hopefully it will also succeed in raising the overall standard of accommodation in the private rented sector. We will be watching the passage of this bill through Parliament with much interest.
If you would like to discuss the way this issue affects you as a landlord, owner or prospective buyer of a leasehold property, please do give Graham Faulkner a call.
The levelling up agenda is being used as an umbrella to fix many perceived injustices in our lives. One of those is the ground rent system. Historically often ‘peppercorn’ by nature, in more recent times it has been used rather unscrupulously by many developers to create income streams that have ended up causing significant financial pain to many homeowners, with rent increase clauses rapidly changing the sums due.
Now the government has confirmed that from 30 June 2022, anyone buying a home on a new long lease will be freed from these annual costs, helping homeowners manage their bills as they face cost of living increases.
This certainly makes new build flats more attractive for private landlords, who will no longer have to factor the increasing ground rent charges into their costs. The savings could prove significant.
Perhaps of more interest to existing landlords is the related work being undertaken by the Competition and Markets Authority to remove costly ground rent terms from existing leases. They have secured undertakings from a number of freeholders to revert ground rent levels to those in place when the property was first sold.
If you have a property where the freeholder is one of the following businesses, you should now benefit from this. This will help not only landlords, but also those people who are struggling to sell a property impacted by such a lease. The sale-ability and value should be positively affected by this.
If you own, or are considering buying a leasehold property, this is a very useful guide from the Competition and Markets Authority.
If you would like to discuss the way this issue affects you as a landlord, owner or prospective buyer of a leasehold property, please do give Graham Faulkner a call.
The government white paper on ‘Levelling Up the United Kingdom’ identifies housing as one of the key factors that must be addressed to remove the geographical disparities that cause so much economic and social unfairness across the country.
The white paper makes two basic commitments:
It’s difficult to say with certainty and the impact needs to be set against the fact that, in general terms, living standards in and around Dorking are generally pretty good. That said, local property prices have increased at levels that are beyond national and regional averages, and whilst average earning potential locally is also better due to the availability of higher paid jobs in and around London, getting onto ‘the housing ladder’ is a major challenge for the younger generation.
A number of specific initiatives are discussed in the white paper to help make housing affordable for more people. These are:
For property developers, it is likely that the focus on creating a pathway to ownership for first time buyers will impact the approach they take.
A key commitment in the white paper is to improve housing conditions, an objective that will have a significant impact in he private rental sector. Key plans include:
The objective is to set a new benchmark for the relationship between landlords and tenants. At EweMove, our whole ethos is around creating a fair process for both parties in the way we manage properties on behalf of our landlords. Our hope is that for the vast majority of conscientious landlords, the proposals should not be overly burdensome. They are designed to crack down on the rogue landlords, not the good ones.
Perhaps of slight concern to landlords should be the wider objective of creating a pathway from renting to ownership. Little guidance is given on how this will occur, but it is an area we will be watching carefully to understand how the government plan to deliver on this. In the longer term, it could have the effect of dampening demand for rental property and thus reducing yields for landlords.
For most landlords, the proposed changes may not prove overly onerous – in many cases, they simply affirm what should be good practice.
One other possible impact will be a greater level of oversight of the Private Rented Sector from local authorities. We can expect to see more inspections and enforcement notices.
In general terms, the property related objectives in the levelling up White Paper should be welcomed. Getting onto the property ladder is certainly a challenge locally and it is to be hoped the proposals will make that easier for our younger generations. That said, it looks like the funding for affordable housing will be targeted mainly elsewhere, so we may see less benefit than other areas.
Local landlords should be prepared for further regulation and oversight, whether than be nationally overseen or delivered by the local authority. But we don’t expect it to be a major issue for the majority of landlords.
We will be watching for future announcements on this to understand in more detail what the local impact might be.
If you would like discuss any aspects of the legislation that governs the private rental sector, please give Graham Faulkner a call.
Demand for rental property remains strong and for landlords, the effective return on investment makes property an attractive investment to hold. The average rental income in Dorking has increased by 8% in the last 12 months, with demand for detached family properties particularly strong. Professional landlords will have a clear picture of their legal obligations and have hopefully got a schedule of activity mapped out to ensure they meet those.
But with many accidental landlords entering the market every year, it’s worth taking a look at the current and future legal obligations. With climate change such a significant part of our news agenda presently, its no surprise the energy efficiency is a factor and likely to become more so in the next 5 to 10 years.
The Gas Safety (Installation and Use) Regulations 1998 (GSIUR) outline your duties as a landlord to make sure all gas appliances, fittings, chimneys and flues are safe and working efficiently. If you’re letting a property with gas appliances installed, you’ve got three main legal responsibilities:
The Smoke and Carbon Monoxide Alarm (England) Regulations 2015 required landlords to provide a smoke alarm on each habitable storey of a rented property and carbon monoxide alarms in any room with a solid fuel fire.
More importantly, the landlord is required to check these devices before each tenancy. You must make sure that they remain fully operational and are replaced in line with the manufacturers recommendations.
The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 require all rented property to be subject to a full electrical safety inspection every 5 years. A copy of the report must be provided to the tenant when completed, or to a new tenant when the tenancy starts. Prospective tenants are also entitled to request a copy.
Portable Appliance Testing (PAT) is also strongly recommended as a way to satisfy the requirement to make sure the electrical system is safe and all appliances they supply are safe. In most cases, this can be easily done at the same time as the electrical safety inspection.
An Energy Performance Certificate (EPC) lasts for 10 years and is a requirement for every new tenancy now. It is unlawful to enter into a new tenancy agreement if there is not a current EPC for the property. It allows the prospective tenant to understand in broad terms how much it will cost them to heat and run the property.
The Energy Efficiency (Private Rented Property) (Amendment) (England and Wales) Regulations 2019 set out landlords’ obligations to improve the energy efficiency of their properties. The latest set of guidelines came into effect on 15th March 2019. In simple terms, any rented property that has an EPC rating of ‘F’ or ‘G’ (the lowest energy efficiency ratings) must be brought up to at least ‘E’ before it can be let to a new tenant. Certain exemptions do exist in very limited circumstances and the maximum funding currently required by a landlord is £3,500 (inc. VAT) per property. If an exemption is to be claimed, it must be registered.
Looking a little further ahead, it is very likely that legislation will be introduced requiring landlords to raise the EPC for rented properties to a much higher level – the current target being proposed is ‘C’. So if you are planning any work to your properties, you should consider work to improve the energy efficiency of the property as part of that.
The Minimum Energy Efficiency Standards (MEES) regulations are enforced at Local Authority level, with financial penalties for non-compliance.
If you would like discuss any aspects of the legislation that governs the private rental sector, please give Graham Faulkner a call.
I’ve been involved in the property market for more than half my working life and it’s fair to say that 2020 and 2021 have been two of the most turbulent years I have ever experienced. To describe them as a rollercoaster might be a dis-service to the thrill rides at some of the theme parks across the UK!
At various times, we have faced being almost completely closed, then permitted to operate with significant restrictions, then back to almost business as usual. The government and financial regulators have intervened, with a range of policies that have been more and less visible to the public. Did you know that rules set by the Financial Conduct Authority have had a major impact on mortgage lending in the last 18 months or so? Not only does that affect first-time buyers, but it also affects those looking to move up the housing ladder, who through no fault of their own, suddenly find themselves unable to secure new lending, despite being in a better financial position.
So, as we all look forward to 2022, in the hope that there is light at the end of the tunnel, these are my 4 main hopes for the year ahead.
Fiscal Stability
2020 and 2021 have been characterised by constantly changing rules on Stamp Duty Land Tax (SDLT) as the government sought to stimulate activity on the housing market. It had a dramatic effect on transactions as large numbers of people sought to take advantage of the reduction in SDLT to move house, with the expectation of making a tax saving that, on the face of it, could be quite significant. In some cases, up to £15,000 saved for those purchasing a property worth £500,000 or more between July 2020 and June 2021.
But in that same time frame, average prices increased quite dramatically. In Dorking, the average sales price for all properties in July 2020 was £454,920. By June 2021 that had increased to £529,784. An increase of almost £75,000. Suddenly, the saving of £15,000 looks like less of a bargain.
The reality is that a little fiscal tinkering has actually driven up property prices through a simple surge in demand and an ongoing paucity of supply. What the market needs is a better supply of family homes and some stability in fiscal policy.
The House Buying Process
For as long as I can remember, gazumping and gazundering have been terms associated almost exclusively with the property market. Their prevalence comes and goes as market forces shift the balance of power between buyer and seller, but unpleasant stories of innocent families affected by one or the other are never far away.
The government tinkering with fiscal policy in the last 2 years has simply fuelled the fire and reminded me why we probably should be looking for a process that brings a fairer balance to the rights of each party in the house sale and purchase process. It can only be achieved through a change in the law and I suspect the chances of much happening on this front are slim given everything else that is pre-occupying our government right now.
As agents, we are in a very difficult position. We act on behalf of our clients, helping them to sell their property. In the event an offer is made in respect of that property, we are obliged to present that offer to them.
The system in Scotland is very different and whilst there does not seem to be the appetite to adopt the same process, some form of change would certainly make the whole process of buying and selling property fairer and less stressful for everyone involved. It’s probably a longer-term prospect, but change is certainly required.
Leasehold Property Reform
The vast majority of property in the UK is owned on a freehold or leasehold basis. A freeholder has complete ownership of the building and land on which it sits and how that is used. Traditionally, freehold property ownership was used to manage situations such as blocks of flats, where each of the individual properties was obliged to pay both a ground rent and a contribution to the maintenance of the buildings themselves.
In recent years, developers have recognised an opportunity to create longer-term income streams from freehold property and have been using the ownership structure to ‘sell’ far more of their properties, even detached houses. The leaseholders have then found themselves subject to escalating ground rent and maintenance charges that often bear little relationship to the actual value or costs involved and can make the leasehold very difficult to sell. Many talk of feeling trapped, unable to sell their properties due to the ownership structure.
Leasehold properties will typically start at 99 or 125 years, but as the remaining period decreases, so the value of the property does too. Leasehold extension can be complex and causes many issues for leaseholders, with different rules applying to flats and houses and the calculation of the cost to extend a lease involving a number of complex calculations.
Traditionally, ground rent on leasehold properties was of a nominal amount. But as developers sought additional income streams, so ground rents have increased, often with escalator clauses that stipulate the amount by which it increases.
In May 2021, the government launched the Commonhold Council to help drive reform in this area with proposals to create a new form of collective home ownership called ‘Commonhold’. It is my hope that 2022 starts to see some real change for those affected.
Mortgage Affordability Rules Eased
With the onset of the Covid pandemic, the financial regulators imposed significantly more stringent rules on mortgage lenders, making it far harder for many to secure the lending needed to make their property moves. The current rule requires a borrower to earn enough income to afford their mortgage repayments even if interest rates rise by 3 per cent above the rate stated on their contract.
We are of course now seeing inflation rise above 5% and we have already seen the first reaction from the Bank of England with an interest rate rise in December 2021. Whether we see more rises in the short or longer term, or not is beyond my knowledge, but I do know that the rules introduced caused many with otherwise good credit records to be denied the lending they needed to make their moves, or even simply to secure a better interest rate on an existing mortgage. In some cases, people were driven to sell homes because they were unable to secure a re-mortgage at the end of an existing fixed rate. Those are not the property sales I want to be handling for people.
The good news is that it seems likely the Bank of England will make some changes to these rules and I hope we will see that happen early in 2022.
If you would like discuss what is likely to happen to the property market in Dorking, Leatherhead or the surrounding villages in 2022, give Graham Faulkner a call.
EweMove Dorking & Leatherhead 