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So what will happen in the Medway rental market in the short term?

 

Well, nothing will happen in the next 12 to 18 months. It’s business as usual!

 

And the long term?

 

Rents will increase as the fees tenants have previously paid will be passed onto Landlords in the coming few years. Not immediately. But they will.

 

As a responsible letting agent, I have a business to run. It takes, according to ARLA, (Association of Residential Letting Agents) on average 17 hours work by a letting agent to get a tenant into a property. We need to complete a whole host of checks prescribed by the Government; including a right to rent check, Anti Money Laundering checks, Legionella Risk Assessments, Gas Safety checks, Affordability Checks, Credit Checks, Smoke Alarm checks, Construction (Design & Management) Regulations 2007 checks, compliance with the Landlord and Tenant Act, registering the deposit so the tenants deposit is safe and carry out references to ensure the tenant has been a good tenant in previous rented properties.

 

All of which the vast majority of lettings agents take very seriously and are expected to know inside out making us the experts in our field. Yes, there are some awful agents who ruin the reputation for others, but isn't that the case in most professions?

 

Business is business and I know for certain that no landlord, no tenant and certainly no letting agent does work for free. 

 

I, along with every other Medway letting agent will have to consider passing some of that cost onto my landlords in the future. Now of course, landlords would also be able to offset higher letting charges against tax, but I (as I am sure they) wouldn’t want them out of pocket, even after the extra tax relief.

 

So what does this all mean for the future?

 

The current application fee for a single person at my lettings agency is £200 and for a couple £400 meaning on average, the fee is around £400 per property. 

 

I am part of a Group of 500+ Letting Agents, and recently we had to poll to find the average length of tenancy in our respective agencies. The Government says its 4 years, whilst the actual figure was nearer one year and eleven months, so let’s round that up to two years.

 

That means £400 needs to found in additional fees to the landlord, on average, every two years.

 

In actual pound notes.

 

In 2005, the average rent of a Medway property was £771 per month and today it is £946 per month, a rise of only (against an inflation rate (RPI) of 38.5%).

 

Using the areas average management rates of 13% this means the landlord will be paying around £1475 per annum in management fees.

 

If the landlord is expected to cover the cost of that additional £400 every two years, rents will only need to rise by an additional 2% a year after 2018, on top of what they have annually grown by in the last 5 years.

 

So, if that were to happen in Medway, average rents would rise to £1161per month by 2022  (see the red line on the graph) and so the landlord would pay around £1811 per annum in management fees , which would go towards covering the additional costs without having to raise the level of fees.

 

 

 

So, is that bad news for Medway tenants?

 

Quite the opposite. Look at the blue line on the graph). If the average rent Medway tenants pay had risen in line with inflation since 2005, that £771 per month would have risen today to  an average of £1068 per month. (Remember, the average today is only £946 per month) and even if inflation remains at 2% per year for the next six years, the average rent would be £1161 per month by 2022. This means that even if landlords increase their rents to cover the costs tenants are still no worse off.

 

Conclusion

 

The banning of letting fees is good news for landlords, tenants and agents.

 

It removes the need for tenants to find lump sums of money when they move. That will mean tenants will have greater freedom to move home and still be better off in real terms compared to if rents had increased in line with inflation. 

 

Landlords will be happy as their yield and return will increase with greater rents whilst not paying significantly more in fees to their lettings agency. Letting agents who used to charge fair application fees won’t be penalised as the rent rises will compensate them for any losses.

 

 

And the agents that charged the silly high application fees? Well, that’s their problem. At least I know I can offer the same, if not a better service to both my landlords and tenants in the future in light of this announcement from Phillip Hammond.

Would you like a current rental and sales valuation of your home or any property within the Medway region? Would you like it to be INSTANT and FREE? How about getting it without having to speak to one of those pushy estate agents? Wishes granted RIGHT HERE!

 

 

Spencer

 

 

With our new Chancellor of the Exchequer revealing a ban on tenant fees in his first Autumn Statement on Wednesday what does this actually mean for Medway tenants and Medway landlords?

 

The private rental sector in Medway is an important part of the Medway housing market and the engagement from the chancellor in Wednesday’s Autumn Statement is a welcome sign that it is recognised as such. I have long supported the regulation of lettings and estate agents. This will ensconce and cement best practice across the property industry. I believe that measures to improve the situation of tenants should be introduced in a way that supports the growing professionalism of the sector. Over the last few years, there has been an increasing number of regulations and legislation governing private renting and it is important that the role of qualified, well trained and regulated lettings agents is understood.

 

Great news for Medway Tenants

 

So, tenants, this is great news isn’t it?  Well before you all crack open the Champers, read this;

 

Although I can see prohibiting letting agent fees being welcomed by Medway tenants, at least in the short term, they won’t realise that it will rebound back on them.

 

Firstly, it will take between 12 and 18 months to ban fees, as consultation needs to take place. Then it will take an Act of Parliament to implement the change. A prohibition on agent fees may preclude tenants from receiving an invoice at the start of the tenancy, but the unescapable outcome will be an increase in the proportion of costs which will be met by landlords, which may, in turn, be passed on to tenants through higher rents. 

 

Published at the same time as the Autumn Statement, hidden in the Office for Budget Responsibility’s Economic and Fiscal Outlook on the Autumn Statement (The Office for Budget Responsibility being created by Government in 2010 to provide independent and authoritative analysis of the UK’s public finances), it said on Wednesday …

 

“The Government has also announced its intention to ban additional fees charged by private letting agents. Specific details about timing and implementation remain outstanding, so we have not adjusted our forecast. Nevertheless, it is possible that a ban on fees would be passed through to higher private rents”

 

 

The charity Shelter and Scotland

 

Scotland banned Letting Fees in 2012. The charity Shelter have been a big voice in persuading and lobbying the Government since it managed to persuade the Scottish Parliament to ban fees in 2012. On all the TV and radio shows at the moment, they keep talking about their Independent Research, which they said showed that, 

 

“renters, landlords and the industry as a whole had benefited from banning fees to renters in Scotland. It found that any negative side-effects of clarifying the ban on fees to renters in Scotland have been minimal for letting agencies, landlords and renters, and the sector remains healthy.”

 

Going on, 

 

“Many industry insiders had predicted that abolishing fees would impact on rents for tenants, but our research show that this hasn’t been the case. The evidence showed that landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK. It found that where rents had risen more in Scotland than in other comparable parts of the UK in 2013, it was explained by economic factors and not related to the clarification of the law on letting fees”

 

As my regular readers know, I believe the devil often lies in the detail….

 

Only yesterday Shelter were quoting this research from December 2013 to say rents never went up following the tenant fee ban in Q4 2012. I have read that research and I agree with that research. However, it was published three years ago, only 12 months after the ban was put into place. 

 

I find it strange they don’t seem to mention what has happened to rents in Scotland in 2014, 2015 and 2016 . Perhaps that is because that tells us a completely different story.

 

So, what really happened in Scotland to rents?

 

I have carried out my research up to the end of Q3 2016 and this is the evidence I have found..

 

In Scotland, rents have risen, according the CityLets Index,

by 15.3% between Q4 2012 and today

 

(CityLets being the equivalent of Rightmove North of the Border – so they know their onions and have plenty of comparable evidence to back up their numbers). 

 

When I compared the same time frame, using Office of National Statistics figures for the English Regions between 2012 and 2016, this is what has happened to rents 

 

·      North East 2.17% increase

·      North West 2.43% increase

·      Yorkshire and The Humber 3.21% increase

·      East Midlands 5.92% increase

·      West Midlands 5.52% increase

·      East of England 7.07% increase

·      South West 5.82% increase

·      South East 8.26% increase

     London 10.55% increase

     Remember Scotland has seen a 15.3% increase.

 

 

Are you really telling me the Scottish economy has outstripped London’s over the last 4 years? Is anyone suggesting Scottish wages and the Scottish Economy have boomed to such an extent in the last 4 years that they are now the powerhouse of the UK? If they had, Nicola Sturgeon would have driven down the A1 within a blink of an eye, to demand immediate Independence.

This article will continue with a look at how the fee banning order may impact Medway tenants and landlords in the short and term long.

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I had an interesting chat with a Wainscott landlord who owns a few properties in the area. He popped his head in to my office as his wife was shopping in the area (and let’s be honest talking about the Medway property market is a lot more interesting than clothes shopping!). We had never spoken before (because he uses another agent in the area to manage his Medway properties).  However, after reading my blog on the Medway Property Market for the last few months, the landlord wanted to know my thoughts on how the recent interest rate cut would affect the Medway property market. I would like to share these thoughts with you now.
 
 
Well it’s been a few weeks now since interest rates were cut to 0.25% by the Bank of England as the Bank believed Brexit could lead to a materially lower path of growth for the UK, especially for the manufacturing and construction industries. You see, for the country as a whole, the manufacturing and construction industries are still performing well below the pre credit crunch levels of 2008/09, so the British economy remains highly susceptible to an economic shock. This is especially important in Medway, because even though we have had a number of local success stories in manufacturing and construction, a large number of people are employed in these sectors. In Rochester, of the 30,136 people who have a job, 2,249 are in the manufacturing industry and 3,364 in Construction meaning;
 
7.5% of Rochester workers are employed in the Manufacturing 
sector and 11.2% of Rochester workers are in Construction
 
The other sector of the economy the Bank is worried about, and an equally important one to the Medway economy, is the Financial Services industry. Financial Services in Rochester employ 1,419 people, making up 4.7% of the Rochester working population. 


 
Together with a cut in interest rates, the Bank also announced an increase in the quantity of money via a new programme of Quantitative Easing to buy £70bn of Government and Private bonds. Now that won’t do much to the Medway property market directly, but another measure also included in the recent announcement was £100bn of new funding to banks. This extra £100bn will help the High Street banks pass on the base rate cut to people and businesses, meaning the banks will have lots of cheap money to lend for mortgages. This could have a huge effect on the Medway property market (as that £100bn would be enough to buy half a million homes in the UK).
 

It will take until early in the New Year to find out the real direction of the Medway property market and the effects of Brexit on the economy as a whole, the subsequent recent interest rate cuts and the availability of cheap mortgages. However, something bigger than Brexit and interest rates is the inherent undersupply of housing (something I have spoken about many times in my blog and it’s specific affect on Medway). The severe undersupply means that Medway property prices are likely to increase further in the medium to long term, even if there is a dip in the short term. This only confirms what every homeowner and landlord has known for decades; investing in property is a long term project and as an investment vehicle, it will continue to outstrip other forms of investment due to the high demand for a roof over people’s heads and the low supply of new properties being built.
I produce a FREE monthly newsletter based on the articles on this very blog. It is all about the Medway property market, what has happened there and what is likely to happen. For your digital copy each month simply CLICK HERE.
Thanks for reading.

 

One of my landlords rang me last week from St Mary's Island, after he had spoken to a friend of his. Over the last few weeks they have been discussing the Medway property market and neither of them could make their mind up if it was time to either sell or buy property. If you read the newspapers and the landlord forums on the internet, there is a good slice of doom and gloom, especially with changes in the taxation towards landlords, new legislation on checking tenants and the general uncertainty in the world economic situation.
Love him or loathe him, how WILL Trump affect the UK property market?
I would admit, there are certain landlords who may have over exposed themselves in the last few years with high percentage loan to value mortgages. Those landlords, with their current interest rates, may start to suffer, as their modest monthly positive cash flow and profit fall when their tax situation changes throughout 2017 and beyond.
 
It appears to me these landlords seem to have treated the Medway buy-to-let market as a sure bet and have not approached this as a business. As a result, they thought "Buy a house - rent it out so it covers the mortgage and make a few quid on top".  These are the people who will be thinking twice. I see opportunity everywhere and it won't be stopping. It’s going to be an exciting 2017.
 
Gone are the days when you could buy any old house in Medway and it would make money.  Yes, in the past, anything in Medway that had four walls and a roof would make you money because since WW2, property prices doubled every seven years … it was like printing money – but not anymore.
You CAN still make money from property, but.....
Taking Strood as an example, since January 1997, the average price , for example, for a flat/apartment has risen from £30,958 to today’s current average of £161,500 in the town, an impressive rise of 422% and terraced/town house have risen in the same time frame, from £44,634 to £205,243, also a great rise of 360%. However, look back to 2005, and in that year, the average flat was selling for £131,800, meaning our Strood landlord would have seen a modest rise of 23% and the terraced owner would have seen an increase of 53%, as they were selling for on average £134,031. These figures appear healthy but lets take a look at inflation;
Since 2005, then inflation, (the cost of living), has increased by 33.4%.That means to retain its value, Strood terraced property bought for £134,031 in 2005 needs to be worth £178,755 today. Therefore, our landlord has seen the ‘real’ value of his property increase by 19.6%; 53% capital growth less 33.4% inflation.
 
The reality is, since around the early 2000’s we haven’t seen anything like the capital growth in property we have seen in the previous years. So it is high time anyone considering investing in property stopped believing the hype and did some serious research using independent investment expertise. You can still make money by buying the right Medway roperty at the right price and finding the right tenant.

Think about it. Properties in real terms are 19.6% higher than ten years ago, so investing in Medway property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment – and what is a ‘balanced property portfolio’? Well, I discuss such matters right here on the Medway Property Blog. You can subscribe using the button at the top right hand side of this page.

I als produce a totally free and detailed monthly report on the local property market. To receive your copy, direct to your inbox, simply CLICK HERE

Thanks for reading. I can be contacted personally This email address is being protected from spambots. You need JavaScript enabled to view it.

 

89% of Medway Homeowners are over 35 so how did their Brexit vote affect the Medway property market?

 

Well it’s been a few weeks since the Referendum vote and we have had a chance to reflect on the momentous decision that the British public took. Many of you read the article I wrote on the morning of the results. I had gone to bed the night before with a draft of my Remain article nicely all but finished, to be presented, at just after 5am, with the declaration by the BBC saying we were leaving the EU. I don’t think any of us were expecting that. 

 

If you want to read a copy of that original Post Brexit blog post, it can be found HERE. In this article, I would like to take my thoughts on from that initial article and now start to see the clearer picture as the dust settles on the UK, but more importantly, the Medway Property Market.

 

In case you weren’t aware, the residents of the Medway Council area went against the National mood and voted as follows

 

Medway Council       Remain Votes                       49,889             (35.9% of the vote)

Medway Council       Leave Votes                          88,997             (64.1% of the vote)

Medway Council Turnout    72.1%

 

I have been reading there is some evidence to indicate younger voters were vastly more likely to vote Remain than their parents and grandparents and, whilst the polling industry's techniques may have been widely criticised, following them getting both the 2010 General Election and the recent Brexit vote wrong, anecdotally, many surveys seem to suggest there was a relationship between age and likelihood to support leaving the EU.

 

Interestingly, the average age of a Medway resident is 37.7 years old, which is below the national average of 39.3, which might go someway to back up the way Medway voted? What I do know is that putting aside whether you were a remain or leave voter, the vote to leave has, and will, create uncertainty and the last thing the British property market needs is uncertainty (because as with previous episodes of uncertainty in the UK economy – UK house prices have tended to go down).

 

Interestingly, when we look at the Homeownership rates in the Medway Council area, of the 72,965 properties that are owned in the Medway Council area (Owned being owned outright, owned with a mortgage or shared ownership), the age range paints a noteworthy picture.

 

Age 16 to 34 homeowners       8,022    or      11.0%  (Nationally 9.6%)

Age 35 to 49 homeowners     22,541    or      30.9%  (Nationally 29.2%)

Age 50 to 64 homeowners     22,909    or      31.4%  (Nationally 30.7%)

Aged 65+ homeowners          19,493    or      26.7%  (Nationally 30.5%)

 

 

 

So, looking at these figures, and the high proportion of older homeowners, you might think all the Medway Council area homeowners would vote Remain to keep house prices stable and younger people would vote out so house prices come down- so they could afford to buy? 

 

But there's a risk in oversimplifying this. The sample of the polling firms are in the thousands whilst the country voted in its millions. Other demographic influences have been at play in the way people voted, as early evidence is starting to suggest that class, level of education, the levels of immigration and ethnic diversity had an influence on the way the various parts of the UK voted. 

 

So what I suggest is this – Don’t assume everyone over the age of 50 voted ‘Leave’ and don’t assume most 20 somethings backed ‘Remain’; because many didn't!

 

 

And the Medway Property Market? Well read my original article HERE in the Medway Property Blog and you can make your own mind up.

Do you have any Brexit concerns? Would you like some free, impartial advice? Feel free to at This email address is being protected from spambots. You need JavaScript enabled to view it.

I also produce a FREE monthly, Medway property market report. It is full of interesting facts and articles similar to this one. For your copy each month, simply click here:

www.medwaynewsletter.com

Thanks for reading.

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