Wed, 12 Apr 2023 | Lettings market update
With the first quarter of the year under our belts, we are delighted to be able to share with you our insight into what’s been happening in the local property market and our views of what is to come April and beyond.
Included in this newsletter you’ll find a legislation update from our Head of Property Management Joanne Kay, the Hot Topic and what this means to Landlords discussed at our most recent Landlord Workshop hosted by our Head of Lettings, Michael Gallagher as well as a Residential Sales market update and the best rates currently available on Buy-to-Let properties from our Head of Sales, Roberto Contreras.
The lack of stock in the lettings sector is a point which can be seen as both positive and negative for and has continued from 2022 through 2023. Demand for property is still extremely high and stock levels are just not increasing enough to cater for demand. This is causing tenants on the hunt for property to be utterly relentless in their bid to be the first to be informed about new listing for let.
What we have done to counteract this with high demand properties is factor in an open house approach, which enables us to be able not only get the best price for our clients but also look to ensure we are able place the best tenants to suit your requirements.
We are seeing is another surge again in new rental prices and this is being mirrored in the renewals of tenancy we are currently processing too. With current tenants being more than happy to increase their rental prices in a bid to secure the property for longer periods. With the upcoming new rental form, it is important for agents to spend time preparing for the imminent changes and reviewing their services to improve the whole landlord experience.
Here at Prospect we are focusing on the below key areas:
Our New App for Landlords
We are in the final Beta stage of testing our new app that is designed to enable our Landlords to be able to see everything at the click of a button and communicate directly with their Property Manager and accounts team via a chat function. We will be the only agent in the Home Counties to offer an Android and IOS version of a bespoke Landlord app – watch this space for more information coming very soon!
Tenancy Renewals
Every year we place a lot of focus on increasing tenancy lengths and ensuring our landlords rentals keep in line with new market values. This year, the average rental increases are as high as 7%! With the imminent white paper reform which will see new fixed term tenancies become a thing of the past, it’s important to work now to ensure longevity for our landlords existing tenancies.
Deposit returns
This is often one of the biggest areas of frustration for many Tenants. So, working in line with The Tenants Deposit Schemes best practise guidelines, we have been streamlining our process to offer Landlords and Tenants a much simpler check in / out report and process to ensure any issues are quickly and clearly highlighted, removing any confusion or conflict.
3 free quotes with our maintenance service
Working alongside The Property Maintenance People we are excited to have restructure our maintenance process. Improving our trusted panel of maintenance suppliers, we have also introduced a new non-urgent work 3-quote process, all at the click of a button. As well as this, we are also reviewing all upfront costs for items such as Gas Certificates, EICR report and Professional Cleans to make these more cost effective for our clients. Finally, we are exploring the ‘floats’ held on each account for our fully managed clients. Enabling us to speed up the whole process of quote to approval and ensure works are carried out in a timely manner, keeping both Landlord and Tenant happy.
As quarter two of the year progresses we will continue to keep you updated on the work we are doing here behind the scenes to keep our Landlords properties let, managed and profitable. We’d like to thank you for choosing Prospect to manage your property and, as always, welcome any and all feedback on our services to continue to help us improve.
Landlord Workshop – The HOT Topic
The residential lettings market is a dynamic and diverse sector. In any economy it’s important for landlords, in fact anyone involved or interested in the lettings division, to keep on top of trends of the market.
The past 12 months have seen a number of legislation changes and many changes to tax and mortgage rates have been put into place too, making it more important than ever to be on top of everything happening in the Lettings market. That’s why we decided to host a Landlord Workshop back in January and answer any questions and ease any worries our Landlords may have.
Our fully booked Landlord Workshop was hugely successful and gave our attendees the chance to really hash out any worries they may have about recent changes, whilst also giving them an industry insight into the local lettings market.
Taking place in our striking Head Office based in Reading, our Landlords that attended benefited from:
- Overview of the current market conditions
- Advise on tax and how to make an investment property more tax efficient
- Update on legislative changes
- Networking opportunities
- Troubleshooting and problem-solving
- Further access to resources and support
The feedback from the attendees of our first Landlord Workshop was outstanding. With many calling it an invaluable investment of time and a great way to stay informed, connected, and up-to-date with the latest developments in the private rental sector.
Mr R Gill commented, “Great concept and really good value added by Prospect, not many (or any?) agents I know are doing something proactive like this. Especially in the current climate where a lot of investors may be spooked by market conditions, anything like this will be well received. Good presentation, market analysis and speakers were good and relevant.”
The hottest topic of the Workshop was undoubtedly around tax and the vehicles we use to buy and hold investment properties.
David White of Charter House Accounting explained the key differences between holding a buy-to-let property in a personal name versus a company and what, as a Landlord, is the best option in today’s economy. Here’s a quick summary of the two main key benefits of holding your properties within a company:
- Tax efficiency: This is one of the primary benefits of holding your property within a company because rental income earned by a company is subject to corporation tax, which is currently lower than the income tax rate for individuals. Additionally, companies can claim a wider range of tax-deductible expenses, including mortgage interest and property maintenance costs, which can reduce the tax liability.
- Estate planning: Holding a buy-to-let property in a company can also offer more flexibility for estate planning purposes. Shares in the company can be easily transferred to beneficiaries, allowing for more control over inheritance tax liabilities.
Following David’s insightful presentation, Gerardo Gesparro of Perpetual IFA then talked us through the impacts of the mini budget, change in Prime Minister and the best rates currently available. Another invaluable insight.
Due to a number of factors, including economic conditions, government policies and even cultural changes, the residential lettings market can fluctuate. It’s aways important to keep your finger on the pulse, that’s why our first Landlord Workshop certainly won’t be the last.
In fact, we’re already planning another Landlord Workshop in the near future. Spaces are limited so if you’re interested in joining us and being in the know, register your interest by clicking the button below.
Register for our Landlord Workshop
If you missed out on our last workshop and would like to know more information about the topics discussed and what this means to you and your portfolio, just give your Property Manager a call and they can arrange a call back from our Head of Lettings, Michael Gallagher.
7% increase in rentals this year
As we embrace the lighter evenings and first glimpses of sunshine that the start of Spring brings us, we are equally as enthusiastic about the status of the lettings market.
Current availability of rental units on the market may not be at an all-time high, but the quantity & quality of tenant registrations is higher than it has ever been. This provides our landlords plentiful choice when it comes to selecting the right tenant! After all, a good tenant makes all the difference to your tenancy and how your property is managed.
When dissecting our own data, we can see that more tenants are renewing their tenancies for longer terms of up to 35 months and landlords are achieving rent increases between 7 - 8% across all our counties. The impending White Paper Reform, which is likely to come into place sometime in Autumn 2023, and will make way for all tenancies to become ‘Periodic’ (a 12 month, rolling tenancy), it’s the perfect time for Landlords to work with their agent to lock in good quality tenants for as long as possible. Giving all parties security of tenure.
Whilst we are still waiting for the Government to confirm a date for the abolishment of Section 21 notices, the Government has just issued a new ‘How to Rent Guide’. The How to Rent Guide is an important document and is must be provided to all new and renewed tenancies in order to comply with issuing a Section 21 notice to your tenant(s). As a precaution, here at Prospect we will be issuing the document electronically to all current tenancies.
The ‘Cost of Living’ crisis is a subject that we are all mindful of. Increasing costs spanning everything from our weekly shops to electricity bills, it is hard to ignore the subject. For Landlords, these increased costs can mean that any unpaid rent can drastically impact the running of a property. That’s why we are extremely proud to report that our non-paid rents stand at 1.39% - the lowest we have seen since March 2020 pre Covid which averaged 1.18%. The average unpaid rent across the UK sits around 9 – 10%, so this is welcome news for all Prospect landlords.
Experienced Property Management Team
The key to ensuring such low unpaid rents goes back to securing quality tenants, as well as the relationships our Property Managers build with tenants. Naturally, having a ‘good’ tenant in place removes the initial worry about someone not paying. However, especially in this economy, circumstances can change. Thanks to the relationships our Property Management team build with tenants, we are often able to identify any issues and work directly with tenants to find a solution - before it becomes a major problem.
As always, we have continued to evolve our Property Management division throughout the first quarter of the year. Investing in the best tools and software to create timesaving efficiencies, which in turn allow more time to be proactive when managing your investment. It’s not just systems and software we invest in, we invest in our staff too. This invest means we can proudly say that our in-house Property Management team are all qualified or working towards NFOPP industry standard qualifications. This not only gives our Landlords peace of mind and assurance in the knowledge and advice they receive from us, but also gives our staff personal job satisfaction.
As we look forward to the longer days and better weather we will continue to evolve and raise the bar for Property Management and Lettings services for local landlords.
As one of our existing landlords, we always welcome your feedback. It helps us learn, grow and live up to our title as the Best Lettings Agency in the UK. We also invite you to earn £250 credit for your account, to be used in any way you wish, by recommending our services to any other local Landlords you may know. With £250 available to you per referral, it really is an excellent way to keep running cost down in this turbulent economy.
To discuss your experience or to refer us a new client, please contact our Head of Property Management, Joanne Kay on jkay@prospect.co.uk or by calling 0118 955 9740.
Sales Market Update
After a busy first three months of the year, we now have enough real time measures to provide a comprehensive update of what the residential sales market is doing in 2023 and what we expect to happen for the rest of the year.
The line “back to normal” is being used to describe market conditions by a lot of people in the industry and after delving into our own figures, we agree that this is pretty much the case.
The traditional Christmas slow down came early last year thanks to the ‘Liz Trust effect’. As we all know, our media outlets love to get the most views and clicks so headlines of 20% price drops, mortgage rates sky rocketing, cost of living crisis and a looming recession were all over our news feeds. With all the doom and gloom being reported, many people decided to wait until the new year to re-evaluate their moving plans.
Thankfully, what we can now say is that the property market is far better than what was predicted. After huge price increases following Covid-19, prices have most definitely ‘corrected’ slightly but the changes are far from the headline predictions.
One thing to still be wary of is news outlets comparing prices to the boom seen in 2021 and most of 2022. Using these years as a comparison is just not realistic. The property market accelerated at a pace we have never seen before and the market was due for a slight slowdown. However, the mini budget put a size 11 boot on the brake pedal at the end of last year and slowed it much quicker than anyone would’ve expected.
Great news is that after looking at the first three months of 2023, normal service seems to have been resumed.
If we compare the current market and prices to ‘normal’ years such as 2018, 2019 and the start of 2020, overall, the property market is in a good place. This more accurate comparison of property prices coupled with a much needed improvement in mortgage rates, has brought confidence back to the market - just in time for our traditionally positive spring and summer period!
Residential mortgage rates have seen a real turnaround over the last six months too, with rates peaking at 6% in October. Today, with a 15% deposit you can secure rates under 4% which is hugely positive news for buyers. Again, if you compare today’s rates to the last two years then of course these are higher, however it’s prudent to remember that we had been experiencing historically low rates for several years.
In fact, there are a huge number of current homeowners who will remember the rates before these historically low rates came into effect. Not only are they used to these rates, they know that history shows us these are very much the norm.
It wasn’t just residential mortgage rates that were affected. Buy to let mortgage rates also followed suit with the steep rises at the back end of last year. This put a freeze on landlords adding to their portfolios. However, just like residential rates, BTL mortgage rates have once again come down with the average rate today being in the 5% region.
One thing for landlords to take into account with their overall costs when looking at their current portfolio, or adding to it, is the fantastic position rental prices are in currently. Whilst mortgage rates and for sale prices have levelled out, rental prices have remained strong. Seasoned investors will agree, if you have the ability to invest now then it’s a great time to. After all, when investing in buy-to-let properties it is always about the long game!
In conclusion, the property market has started extremely strongly in 2023. With the doom and gloom predictions of the media not coming to fruition, we’re seeing so much life be injected back into the market and home buyers and sellers are making the moves they’ve bene dreaming of.
If you’re thinking of buying, selling or investing in a new property, we’re here to answer any questions you might have and help you every step of the way of your property journey.
Contact us today for first looks at all the new listings coming on or book a valuation of your own property by clicking here.