Tag: landlords

Ways to work together to ease Scotland’s ongoing housing crisis

Just before Scottish Ministers slashed Scotland’s affordable homes budget by 26 per cent, Glasgow last month (November 30) became the latest major local authority in Scotland to declare a “housing emergency”, following the lead of Edinburgh and citing “unprecedented pressures” facing the council’s services (writes RICCARDO GIOVANACCI).

While of course there is a political element to these dramatic gestures – Labour-led Edinburgh is blaming Holyrood and SNP-led Glasgow is pointing the finger at Westminster – the declarations are a sure sign that the housing market isn’t working and that something needs to be done.

New statistics just released (December 13) show that the country’s housing crisis is intensifying, with plummeting numbers of both new starts and completions. Starts were down 24%, meaning that the crisis will only become more acute in years to come.

In more pragmatic times, before the private rental sector became public enemy No 1 in the eyes of some of the country’s more radical politicians, private landlords would have stepped into this breach and filled the gap between supply and demand.

They would have done this by bringing properties to market which would have accommodated a fluid and flexible population of tenants at rents they could afford until they found homes of their own or longer-term social rentals which suited their needs.

Now, however, many of the landlords who might previously have provided this service are abandoning the market, driven out by increasingly punitive legislation, fewer tax breaks, rent controls and the mora attractive market of holiday let sites such as Airbnb.

Is this sea change factored in to the concept of a housing emergency in the City Chambers of our great cities? There is little evidence to suggest that it is. Instead, councillors, single-issue charities and NGOs focus exclusively on the perceived plight of tenants. There is a marked lack of balance in current political thinking.

There does not appear to be much in the way of appreciation that elements such as the cost of living, rents, running costs, disposable income and inflation impact on landlords as well as the people for whom they are providing a roof over their heads.

Tenants’ Rights Minister Patrick Harvie was told in April this year by delegates at the Scottish Property Federation that rent control legislation he introduced the previous year had led to investors pulling millions of pounds out of Scotland.

Despite such warnings, the word on the street is that the Scottish Government is considering making the temporary restriction imposed on rent increases to help with the cost of living into a permanent rent control.

It is all very well to criticise others for inaction or for incomprehension of the seriousness of the situation, but what can realistically be done to help alleviate this escalating crisis?

Here are five suggestions which might go some way to help:

  1. The overall tax burden on landlords needs addressed. They are currently taxed full amount and there needs to be a reward to encourage further investment, since the activity is by no means risk-free. There is nothing at the moment withing the tax regime to encourage participants into the sector.
  1. Landlords should be treated with respect, rather than the current disdain. They are responsible grown-ups who want happy tenants. Longer-term lets are in everybody’s interest.
  1. There is no reason not to keep regulation as it is. Landlords have factored the current regime in. But upcoming legislation needs more balance, as it is too heavily weighted in favour of tenants at the moment.
  1. Rent caps are not working and experts said they wouldn’t work. The Government and other interested parties should listen to advice from professionals when it is asked for.
  1. Career advice for young people to consider the trades as a career to improve housing stock in long term.

These are simply suggestions, but the more the parties involved in Scotland’s housing market can work together, rather than against each other, the more likely it is that the current and future crises will ease.

Riccardo Giovanacci is Managing Director at Glasgow-based Rosevale Letting.

Edinburgh renters amongst the most dissatisfied in the UK

It is a challenging time for renters, with rental prices rocketing and demand far outweighing supply –  a recent study revealed that for every 100 rental ads in Scotland, 197 people are looking for a room to rent. 

And while renters face greater financial hurdles, they are also dealing with more problems with landlords. According to the UK Housing Ombudsman, landlords were issued a record number of complaint handling failure orders between July and September 2022, a 105% increase on the previous quarter.

With this in mind, Online Mortgage Advisor wanted to discover where in the UK and the wider world tenants are most and least satisfied with their landlords. They found that renters in both Glasgow and Edinburgh are some of the most dissatisfied in the UK, despite the implementation of rental controls in Scotland.

How did we do it?

We analysed 276,000 rent-related geotagged tweets across the UK, US, and Europe, as well as other OECD nations, using an academic tool called SentiStrength. 

SentiStrength is an AI tool which detects positive and negative sentiment levels in short pieces of text and assigns them a score from 5 (extremely positive) to -5 (extremely negative). 

SEE THE FULL STUDY HERE:

https://www.onlinemortgageadvisor.co.uk/content/rental-grievances/#home

Key findings

  • Belfast is the UK city with the highest proportion of dissatisfied renters with 43.5% of tweets analysed recorded as negative, followed by Glasgow (41.7%) and Bradford (38.7%).
  • Edinburgh came in at number 7 with 36.1%, meaning two Scottish cities appear in the top 10.
  • The UK ranked 9th overall in the list of OECD countries with 34.8% tweets deemed as negative out of those surveyed, with Sweden, Denmark and Ireland occupying the top three spots.
  • The most commonly mentioned words in negative tweets about rent were: “people”, “money” and “time”. 

Renters in Glasgow and Edinburgh amongst the most dissatisfied in the UK

Using the academic tool SentiStrength, Online Mortgage Advisor analysed 276,000 geotagged tweets related to renting to find out which cities had the least satisfied renters.

  • Belfast, is the city with the most dissatisfied renters in the country with 43.5% of all rent-related tweets being recorded as negative. 
  • Glasgow, ranks 2nd with 41.7% of tweets made by renters in the area being recorded as negative.
  • Edinburgh came in at number 7 with 36.1%. 

This means that two Scottish cities appear in the top 10 of our analysis, despite Scotland implementing a rent freeze at 0% from September 2022 until March 2023. The Scottish government then increased this to a cap of 3% in most instances from April 2023. Find the ranking below:

UK cities which are least satisfied with their rental experiences
RankCityNegative tweets (%)
1Belfast43.5%
2Glasgow41.7%
3Bradford38.7%
4Bristol38.3%
5Brighton & Hove37.4%
6Sheffield36.5%
7Edinburgh36.1%
8Nottingham35.9%
8Plymouth35.9%
10Birmingham35.2%

The most common rental grievances

We found it was ‘people’ that tenants take issue with most frequently, with 60 mentions for every 1,000 tweets. Issues range from landlords turning up unannounced to fellow tenants failing to pay their share of the rent and never taking the bins out. The second and third most commonly listed complaints referred to ‘money’ and ‘time’. 

Here are a few of the issues people have voiced on twitter:

See the full study here:

https://www.onlinemortgageadvisor.co.uk/content/rental-grievances/#home

Government announces phased mandation of Making Tax Digital for Income Tax

Self-employed individuals and landlords will have more time to prepare for Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA), following announcement by the UK Government yesterday.  

Understanding that self-employed individuals and landlords are currently facing a challenging economic environment, and the transition to MTD for ITSA represents a significant change to taxpayers and HMRC for how self-employment and property income is reported, the government is giving a longer period to prepare for MTD. The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.  

From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software. Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most customers will be able to join voluntarily beforehand meaning they can eliminate common errors and save time managing their tax affairs.

The government has also announced a review into the needs of smaller businesses, and particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further roll out of MTD for ITSA after April 2027. 

Mandation of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced. The government remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the Tax Administration Strategy.  

Victoria Atkins, Financial Secretary to the Treasury, said: “It is right to take the time to work together to maximise the benefits of Making Tax Digital for small businesses by implementing the change gradually.

“It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC.

“Smaller businesses in particular should be able to experience the benefits of increased digitalisation of Income Tax in a way which meets their needs. That is why we are also today announcing a review to establish the best way to achieve this.”

Jim Harra, Chief Executive and First Permanent Secretary, HM Revenue and Customs, said: “HMRC remains committed to the delivery of Making Tax Digital as a critical part of our strategy for digitalising and modernising the tax system, but we want to make sure we get this right and deliver it effectively.  

“A phased approach to mandating MTD for Income Tax will allow us to work together with our partners to make sure that our self-employed and landlord customers can make the most of the opportunities this will bring.” 

The announcement relates to MTD for ITSA only. Making Tax Digital for VAT has already been implemented and is demonstrating the benefits to businesses and the tax system of digital ways of working.  

Tenant Protection Act becomes law

Rents frozen and most evictions prevented

Emergency legislation giving tenants increased protection from rent increases and evictions during the cost of living crisis has become law after receiving Royal Assent.

The Cost of Living (Tenant Protection) Act gives Ministers temporary power to cap rent increases for private and social tenants, as well as for student accommodation.

This applies to in-tenancy rent increases, with the cap set at 0% from 6 September 2022 until at least 31 March 2023, effectively freezing rents for most tenants during this period.

Enforcement of eviction actions resulting from the cost crisis are prevented over the same period except in a number of specified circumstances, and damages for unlawful evictions have been increased to a maximum of 36 months’ worth of rent.

Tenants’ Rights Minister Patrick Harvie said: “Many people who rent their homes are facing real difficulties as a result of the cost of living crisis. While bills are rising for all of us, many tenants are more exposed as they are more likely to be on low incomes or living in poverty than other people.

“These measures aim to give tenants greater confidence about their housing costs and the security of a stable home.

“Some landlords may be feeling the effects of this crisis too. So while the primary purpose is to protect tenants, the emergency measures also include safeguards for those landlords who may be impacted. 

“For anyone struggling with their rent, I would urge you to contact your landlord, an advice organisation or a tenants’ union to get help as early as possible.”

Edinburgh Lettings Agent Clan Gordon has been looking at what this means for the landlords and tenants that they represent.

Clan Gordon Managing Director, Jonathan Gordon, was part of the Scottish Government’s working Group which consulted on and helped them develop the Private Residential Tenancy (PRT) regime in 2017 which transformed the sector, introducing far greater protection for tenants and simpler procedures for landlords.

He said: “It is reassuring to hear Ministers say the new Cost of Living (Tenant Protection) Bill balances the protections that tenants need, with safeguards for those landlords who may also be impacted by the financial crisis.

“Under the new law, rents for existing private and social housing tenants cannot be increased until at least the end of March 2023 and can be extended for up to a further 12 months in two six-month blocks.” 

So, what does this mean for landlords? Although the rent cap can continue at the current 0% rate or can be varied at ministers’ discretion, there is no cap or limit on increasing the rent when advertising for new tenants.

Jonathan continued, “Despite the media attention when this was announced this is not a ban on landlords ending tenancies.  Landlords can still serve notice as normal if they wish to end a tenancy.

“Most tenants leave during the notice period when they find alternative accommodation so this restriction will have little effect here. If the tenant doesn’t leave during the notice period, the landlord can apply to the tribunal for an eviction order as normal.

“However, the legislation delays a landlord from enforcing an eviction order issued by the tribunal in some circumstances for up to six months.

“Tenants can still be evicted for anti-social behaviour, lender reposition,  abandonment, substantial rent arrears or if the landlords intend to sell or move back in to the property to alleviate financial hardship.

“We are also very pleased to see that as well as considering the tenants in this legislation, there are new safeguards for private landlords who find themselves impacted by the cost-of-living crisis.

“In certain circumstances, Landlords will be able to apply to Rent Service Scotland to increase the rent on a property to cover up to 50% of a limited number of specific costs, including increased mortgage interest payments and increases in landlords insurance or service charges. 

“Interestingly the rent cap also applies to university halls of residence and other student accommodation where energy costs may be included in rent payments.

“There has been widespread concerns about increases to fuel prices, but the legislation prevents landlords passing on gas and electricity cost rises, in increased rents within the next six months unless the landlord can prove excessively high use of any utilities. 

“Students are also covered by the same eviction laws and can only be evicted in cases of anti-social or criminal behaviour. 

“Our approach has always been to encourage landlords to help us support any tenant who faces any difficulties including financial ones and in conjunction with  our landlords we worked to support a lot of tenants financially and otherwise during the Covid pandemic and lockdowns.

“This is going to be a difficult road ahead and we are pleased that the government has put some measures in place to support and protect landlords and tenants. 

The government  advice  website www.costofliving.campaign.gov.scot offers helpful tips, advice and guidance and our team will be very happy to offer advice about the new legislation to those affected by the current cost of living crisis.”

To schedule a call with a Clan Gordon  advisor, visit www.clangordon.co.uk

The Cost of Living (Tenant Protection) (Scotland) Act was approved by the Scottish Parliament on 6 October. It delivers a Programme for Government commitment.

Further information about the Act is available on the Scottish Government website.

Ministers have the power to vary the rent cap while it is in force, and the measures could be extended over two further six-month periods.

Mortgage Misery: Experts predict interest rates hike today

How the new interest rates affect house prices and rent across the UK

  • Housing market: hurry if you’re selling, halt if you’re buying, stay if you’ve borrowed, finance experts advise
  • Landlords will likely increase rent prices or sell to cope with increased mortgage repayments
  • Inflation and interest rates will keep rising, but house prices are already slowing down

TODAY, the Bank of England will decide what the new base interest rates might be, currently at 1.75%. Top market analysts expect this to further rise to 2.25%. 

The Office for National Statistics announced on August 17th that UK inflation rose to 10.1%, from 9.4% two months earlier. The Bank of England expects it to further increase, peaking at 13.3% in October. The accompanying higher interest rates and bleak two-year economic outlook generally means bad news for homebuyers, landlords and renters across the UK.

Top market analysts at CMC Markets expect interest rates to further rise to 2.25% this month. This directly impacts mortgages on variable rates – around 1 in 5 households in the UK – and another 3.1 million whose fixed-rate periods expire in 2022-2023, according to UK Finance estimates.

Borrowers whose repayments are directly linked to the base rate, as set by the Bank of England, will now face mortgage repayments at rates between 3% and 4%, up from 1.75% and 2.75% only five months earlier. This will inevitably spill into rent prices.

CMC Markets analysed the latest data for June 2022 from HM Land Registry, published on August 17th, and concluded that the likely tendency for house prices is in a temporary slowdown, which is good news for those waiting a little longer to buy a home.

Michael Hewson, Chief Market Analyst at CMC Markets comments: “Houses sold in June 2022 only increased in price by 1% compared to May, whereas, last year, this constituted a much more generous 5.7% surge.

“This is only the first month this year for prices to slow down at such a fast rate, so some caution before jumping to conclusions is advised. Remember, house prices may be slowing down, but they are not decreasing. Importantly, since this is transactions data processed at the time, it does not take into account the big leap in interest rates that the Bank of England announced later that month, let alone the even bigger hike in August.

“Therefore, despite the soaring inflation and rising consumer prices across the board, UK house prices appear to be trailing behind because demand for homes has generally come to a screeching halt. Most buyers are weathering the storm for a few more months at least, while some are also working out how the cost of living crisis will pan out in the medium term so that the new mortgage is not squeezing their pockets beyond their comfort zone.

“For those still keen to get on the property ladder, there are plenty of fixed-rate banking products that can insulate them from the current spiralling interest rates on mortgages. They should, however, prepare for the possibility of being faced with higher-than-expected repayments once the fixed rate period expires, as the new variable rates are at the lender’s discretion. Fixed rates are not a cure-all either, as they may now be set to a higher level to start with.

“The buy-to-let market is equally volatile. Landlords will either pass the increased mortgage repayments onto tenants by increasing their rent or simply sell fast to lock in a better price. Right now though, those already on the property ladder are generally better off staying put rather than moving or re-mortgaging. They would not get a good deal on their old house in this market and may likely end up losing more money overall.”

What did the Bank of England do earlier in August?

The Bank of England explained that the rise in interest rates was necessary due to external pressures which are expected to persist. This means that British firms and residents will continue to feel this weight reflected on rising domestic prices, wages outpaced by soaring inflation, and even higher mortgage repayments, despite the Bank’s attempt to widen the borrowing pool through less restrictive mortgage rules.

Although historic, the Bank’s decision was not a surprise for trading analysts at CMC Markets, a London-headquartered financial services company, who believe the Bank was expected to raise interest rates higher than 1.25% during the June meeting, as a means to keep import inflation in check.

This is on the backdrop of a 10% year-to-date depreciation of the British pound sterling against the US dollar and an indication from the Federal Reserve, the US central bank, of a further interest rate increase by 0.5% or 0.75% in September.

Michael Hewson comments: “The UK currently fares worse than both the EU and the US. This is due to its closer dependence on energy shocks than the States and less government intervention to soften the blow compared to its European counterparts.”

What’s next and when will things calm down?

Other than adjusting the interest rates to the accurate level to keep abreast of import inflation, the economic projections for the UK paint a bleak outlook for the next two years.

The UK is projected to enter a recession in the final quarter of this year, the Bank of England announced. The country’s economy will contract by 1.25% in 2023 and 0.25% in 2024, however, inflation is becoming a much bigger long-term threat, with unrealistic chances of falling back to the desired 2% much before 2024.

The current political race for the Conservative Party leadership and the consequent fiscal policies promoted by the new British government is a major factor to take into account for any inflation, GDP, and unemployment projections and investment decisions.

As it stands with the current measures, inflation is expected to peak at 13.3% in October – a sharper increase than the Bank anticipated in June, originally estimated at 11%. It will continue to rise throughout 2023 only to decline in 2024.

Meanwhile, forecasts for the Consumer Price Index (CPI) are less optimistic now, expected to decrease only to 9.5% in the third quarter of 2023, although the Bank anticipates a sharp fall in prices immediately thereafter.

Selling prices are set to increase to reflect rising costs while real household post-tax income is expected to plunge in 2022 and 2023. The Bank predicted that core prices will peak at 6.5% this year, meaning that, in the following six months, food and energy will constitute more than half of the headline CPI.

The next meeting for the Monetary Policy Committee, where the Bank of England will decide what the new base interest rates might be, is today – September 22nd.

Majority of professional landlords with large portfolios have no succession plan in place

Handelsbanken Wealth and Asset Management urges professional landlords to plan for the future

Most professional landlords with large portfolios (52%) have no succession plan in place, risking the future sustainability of their business for the next generation.

The findings, from local relationship bank Handelsbanken, also suggest a worrying lack of succession planning among older landlords, with half of those aged 45 or above lacking any long-term management plans.

According to Handelsbanken’s SME Landlord Survey Report 2022, which surveyed 120 professional landlords with at least four properties, more than a quarter (27%) of those with no succession plan said they had not had the chance to develop one yet, while 23% admitted it had simply not crossed their minds.

Around one in five (19%) said that they had no one to leave their portfolio to, while 15% stated it is simply not a priority for them – with the same proportion saying the process was just too complicated.

The study shows that landlords with smaller portfolios are far more likely to have taken steps to protect their portfolio from estate tax liabilities: an overwhelming majority (96%) of landlords across all age groups with a portfolio of four or five properties say they have long-term succession plans in place, compared to just 52% with more than 10 properties, suggesting that those with higher value estates are less concerned about the tax liability facing the next generation.

Among all those with a clear succession plan in place, more than half (54%) plan to convert their portfolio into a property development portfolio to attract business property relief, while 43% are considering a charitable trust, which would enable the handover of business to their heirs with minimal tax exposure.

Other popular options include family trusts (35%), family investment companies (28%) and acquiring agricultural properties to qualify for agricultural relief (26%).

Plans and solutions for succession planningPercentage of respondents
Converting portfolio to a property development portfolio to attract BPR54%
Charitable trusts43%
Family trusts35%
Family Investment Company28%
Acquiring agricultural properties for Agricultural Relief26%

Christine Ross, Head of Private Office (North) and Client Director at Handelsbanken Wealth and Asset Management, a subsidiary of Handelsbanken, said: “The success of buy-to-let over the past decade has created huge numbers of wealthy landlords – with a real need for dedicated financial and tax planning.

“Property investors with substantial portfolios often defer creating a wealth succession plan, but are prompted into action when considering the alternative – the need for their heirs to sell assets to meet the tax liability on death.

“A plan that includes the use of a family investment company or a trust may carry some initial tax cost, but if put in place early enough, has the potential to create far greater savings over the longer term.”

To read the full Handelsbanken’s SME Landlord Survey Report 2022, please click here.

Landlords plan to expand portfolios in response to growing demand

Handelsbanken research shows half plan to buy over the year ahead as confidence in residential and commercial property demand grows

SME landlords[1] are planning to expand their portfolios in the year ahead as optimism about residential and commercial property builds despite fears of an economic downturn and the cost of living crisis, new research* from property business experts Handelsbanken shows.

Its nationwide study shows half (49%) of professional landlords – those owning at least four properties – intend to buy more, of which 8% plan to invest in improving the quality of their portfolio, underlining their enduring confidence in bricks and mortar as long-term investment.

Just 7% of landlords expect to sell some or all their portfolio, and a third (35%) are committed to retaining their current properties for the next 12 months.

The first Handelsbanken SME Landlord Survey found 86% of landlords expect a rise in demand for residential property, with nearly two-thirds (63%) confident that commercial property demand will also increase in the next 12 months.

Landlords’ optimism is not being driven by expectations of substantial increases in yields – Handelsbanken’s research shows average yields are only expected to rise by 0.44% over the period, although 89% of landlords questioned do expect an increase.

Instead, their plans to buy more properties are motivated by a desire to diversify their assets across different sectors and regions.

Nearly three-quarters (73%) said their plans to buy are focused on expanding into different parts of the property market – the most attractive are houses (66%), followed by flats (38%), houses of multiple occupation (HMO) (34%) and commercial retail (32%).

Among landlords expanding their portfolios to different parts of the UK, London is seen as the most attractive region (selected by 53%), followed by the East of England (chosen by 40%) and the East Midlands (22%).

More than half (51%) of landlords on the acquisition trail said their reason for buying was simply feeling bullish about the market.

James Sproule, UK Chief Economist, at Handelsbanken said: “Recent house price growth shows how property has shown its resilience against economic doom and gloom and the cost-of-living squeeze. 

“Landlords are anticipating that a shortage of rental properties will help keep prices buoyant, particularly as working patterns continue to adjust to the post pandemic world and people seek to move back to big cities, particularly in popular areas such as London, which is also seen to be better placed to ride out the next series of economic challenges and opportunities.

“Landlords went through a tough period following the COVID-19 pandemic, with residential property transactions falling by more than half and business investment contracting. But the sector has survived and is now looking forward.

“The 2022-23 financial year is forecast to see a further softening in residential property transactions as vendors wait for the right buyer rather than accept any perception of loss in value.”

The table below shows how professional landlords rate the attractiveness of regions across the country:

REGIONHOW MANY LANDLORDS THINK IT WILL BE THE MOST ATTRACTIVE OVER THE NEXT 12 MONTHS
London53%
East of England40%
East Midlands22%
Scotland19%
Northern Ireland18%
North West14%
South East12%
Wales12%
South West10%
West Midlands8%
North East6%
Yorkshire & The Humber6%

[1] Professional landlords with a minimum of four properties in their portfolios. This applies to all references to “landlords” within this release.

Property_Survey_ReportDownload

Revealed: Student landlords make over half a billion pounds per year in Edinburgh

A new study has revealed that Edinburgh is one of the top 5 most profitable UK cities for student landlords to invest in.

With the UK housing market continuing to grow and the rental sector booming, there are enticing opportunities in university towns for student landlords. Yet with 164 higher education options across the UK, which cities should landlords be looking to invest in?

We have worked with CIA Landlords to reveal The Best UK Cities for Student landlords. The student population of each city, the number of households and the average rent in student areas have all been analysed to find the most profitable opportunities for landlords.

EDINBURGH:

  • Edinburgh student landlords are making over £568,428,420 per year 
  • Edinburgh rental prices cost students an average of £1,285 per month, the 5th most expensive in the UK.
  • Edinburgh has the 10th highest student population which accounts for over 15% of the city’s overall population.

UK general:

  • London student landlords are making over £2.6 billion a year in revenue.
  • Belfast was found to be the 2nd best city for student landlords to invest in the UK.
  • Reading, Derby and Luton were found to be the least profitable cities.
  • London has the highest rental prices averaging at £2,569 for students.
  • Oxford and Bristol follow after London for the highest average student rental charges (£1,788 and £1,544 per month respectively).

You can find the full study on the following link: 

https://www.cia-landlords.co.uk/news/the-best-uk-cities-for-student-landlords/

Short-term lets: professional advice is ‘the only real safeguard for owners’

As Edinburgh tightens the net on Airbnb-style short-term lets, what are the options for property owners and landlords?

By Calum Allmond

It was always on the cards that if restrictions were to be introduced on short-term letting in Scotland, Edinburgh would be first out of the blocks. And, sure enough, the council last month introduced a city-wide “control zone”.

The capital, which for obvious reasons is the country’s tourist Mecca, has become a magnet for Airbnb-style short-term lets over the last decade, leading to concerns about housing shortages and perceptions about anti-social behaviour.

Under draft proposals which will now go to Scottish Government Ministers for final approval, property owners will soon need planning permission to be able to operate short-term lettings and will have to apply for a change of use certificate from the planning department.

What is less well known is that the council has always had the power to require planning permission in the event of a material change in environment, such as short-term rentals. The difference is that, from now on, this will be mandatory.

It should be noted that the proposals only apply to secondary lettings, i.e., properties which are not an owner’s primary residence. People will still be able to let out their homes while on holiday, or rooms in their home while they remain in residence.

However, while the new restrictions appear to be forging ahead, it still remains unclear what policies the local authority will eventually apply. The current Development Plan – the overarching guide to future council thinking – makes no mention whatsoever of short-term lets.

Nor, surprisingly, does the document designed to replace it, the City Plan 2030, which again does not concern itself with the issue – making it increasingly difficult for property owners to plan ahead.

One can only speculate at the moment about whether permissions will be granted for continued short-term use, and on what grounds. Nor is there any clarity about whether numerical limits will be imposed.

Were there to be limits, it would be reasonable to assume that applications would be allocated on a first-come, first-served basis, so landlords hoping to remain in the market might be advised to act sooner, rather than later.

There is, of course, an existing provision in law whereby if a short-term let has been operating for more than 10 years, with no action against it by the council and no action to conceal its operation, then it is entitled to a Certificate of Lawfulness to continue operation, though necessary evidence will be required.

As of the start of this month, there have been nine applications so far this year for planning permissions for short-term lets, only two of which have been granted – and they both involved Certificates of Lawfulness.

What to do if applications fail is clearly now a matter of immediate concern for property owners and DM Hall’s specialist rural arm Baird Lumsden is currently embarked on an information campaign around the sales, letting and management options which remain open.

It has gone into the issue in depth, in anticipation that Highland Council will be the next authority to impose short-term let restrictions around the Badenoch and Strathspey area, and is reaching out to concerned parties.

Informed and impartial advice of this nature is something of a port in a storm for property owners who are caught between a rock and a hard place as the restriction net tightens.

There has been anecdotal evidence of landlords exiting the short-term market and moving to longer lets in the private rental sector. But regulation in this sphere of activity is getting stricter all the time, and the imminent New Deal for Tenants will do nothing to ease landlord pain.

On a superficial level, it is easy to understand the council’s hope that properties taken out of short-term lets will find their way back into the housing stock, thus easing ongoing shortages.

But a counter-argument, articulated by bodies such as the Association of Scotland’s Self-Caterers, is that lack of house-building is as much of a contributory factor to shortages, and that short-term lets bring in huge volumes of valuable tourism revenue to the city.

As things are, some smaller operators may indeed be forced to sell up and quit the market, although larger letting concerns will almost certainly continue to jump through the necessary hoops.

In this volatile environment, expert professional advice is the only real safeguard, and prudent property owners and landlords will seek it out as timeously as possible.

Calum Allmond is Head of Architectural Services at DM Hall Chartered Surveyors.

For further information, contact DM Hall Chartered Surveyors, 27 Canmore Street, Dunfermline KY12 7NU. T: 01383 621262. E: dunfermline@dmhall.co.uk.

W: www.dmhall.co.uk http://twitter.com/dmhallLLP.

For further information about DM Hall’s nationwide network, please contact:

Caroline Wayte, Marketing Manager

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Inner city Edinburgh sees rental growth of 7.2% year on year

  • Average annual UK rental growth* has reached a 13 year high, with rents increasing to £969 (+8.3%) in Q4 2021, up £62 per month since the start of the pandemic 
  • The average rent now accounts for 37% of gross income for a single earner – up from a pandemic dip of 34% during most of 2021 but broadly in line with the 10-year average of 36%
  • Overall, average rents are up nearly 12% over the last five years 
  • Demand for rental properties in January was 76% higher compared to the New Year market between 2018 and 2021 
  • The stock of rental properties currently available across the UK is 39% lower than the five year average around this time of year
  • Inner city London has seen a rental growth of 11% compared to the same time last year -but the decline in rents during the pandemic means this has translated into an increase of just £18 per month in rent compared to March 2020

Average UK rents are tracking at almost £1000pcm – £62 more than at the start of the pandemic – against a backdrop of increased living costs squeezing households, reports Zoopla, the UK’s leading property portal, in its quarterly Rental Market Report.

UK rents squeeze disposable household income as cost of living rises

The UK’s average rental growth has reached a 13 year high, up 8.3% in Q4 2021, meaning households who agree new lets are now having to pay an additional average annual cost of £744, compared to the start of the pandemic (March 2020). 

This increase means that a single earner can now expect to spend 37% of their gross income on rent, which is up from 34% during most of 2021. However, this now brings the figure broadly back in line with the longer term average of 36% as rental growth rises in line with wage growth.

Even with the current sharp rise, the overall increase in UK rents over the last five years totals 12% thanks to the decline in rents seen in some areas during the pandemic. 

Rental market shrinks as demand creates fast-paced rental landscape

The New Year has seen heightened demand for rental properties, up +76% compared to the New Year markets between 2018 and 2021. Yet the supply of rental properties recorded in January 2022 in the UK is 39% below levels typically observed at the start of the year. This is creating competition in the market,  with the imbalance of supply and demand ultimately spurring rental growth. 

As a result, properties are being snapped up. In London, this means renters are having to move quickly to secure the perfect property with the time to let now averaging a fortnight, down from three weeks in late 2020. 

This shrinking stock of homes for rent can be attributed to a continued decrease in buy-to-let investment over the last five years.. As rents rise, more renters will be choosing to stay in their properties, limiting stock turnover. With supply squeezed, it’s likely that continued demand will underpin more modest rental growth in the coming months, especially in city centres.

However, as the spike in demand falls back – hampered by the increases in household costs – it will reduce pressure on supply, ultimately driving more local competition to attract renters in local markets. 

City centre rents continue upward growth trajectory 

Pandemic trends saw strong growth in rental demand in wider commuter zones as renters embraced the ‘search for space’, but demand has now recovered across the central districts of all  major cities including Birmingham, Edinburgh, Leeds and Manchester in a reversal of recent behaviour. This is largely driven by pent up demand from office workers, students, and international residents and investors who are looking for city centre living. 

This is a normalisation of rental behaviour as demand once again rises in more central zones – seen most prominently in inner London with rental growth of 11% compared to the same time last year. But given the steep fall in London rents during the pandemic, this translates to an increase of just £18 per month in rent compared to March 2020.

Gráinne Gilmore, Head of Research, Zoopla, comments: “Rents have risen sharply in recent months, amid a backdrop of rising living costs. But it is important to point out that in terms of rental affordability, in most markets rents are still close to the 10-year average. As demand continues to outpace supply, there will be further upward pressure on rents, but affordability considerations will act as a brake on large rises. 

“In addition, the January peak in rental demand will start to ease in the coming months, putting less severe pressure on supply, which will lead to more local market competition, and more modest rental increases.  

“The flooding of rental demand back into city centres thanks to office workers, students and international demand returning to cities means the post-pandemic ‘recalibration’ of the rental market is well underway.” 

James Evans, CEO at Douglas & Gordon, comments: “Since the beginning of the year, we have seen a clear trend of people coming back to London and the office. This has contributed to around a 40% increase in new lettings applicants compared to the same month last year.

“As there is also still a very restricted supply of properties, we’re seeing landlords achieve record prices, a high quality of tenant and almost no void periods. With competition for properties at the level it is, there are 35-40 new applicants for every rental property in London and around four offers received per agreed let, so tenants are having to put themselves in the best position possible to get the properties they want. 

“Following a strong sales market in 2021, and more confidence in future price increases in London, we are seeing more buy to let investors entering the market. With some of the recent legislation changes, the need for a quality agent is even greater.”

* Based on new lets as recorded by Zoopla