What’s Happening in the UK’s Student Rental Market?

Research carried out by Manor Interiors has revealed that the cost of renting for a student has increased as much as 26% in some areas of the UK but have actually fallen by 2% in Scotland.

Manor Interiors, specialists in built-to-rent furnishing solutions, has found that the average student in Britain pays £132 to rent a student property, reaching £152 in London. However, London and Scotland are the only two regions in the UK where rents have gone down – 16% down in London and 2% in Scotland. In Scotland students now pay an average of £127 per week.

Students in the East Midlands have seen the largest increase, paying an average of £129 per week which is a 26% in crease in just five years. There were also increases in the North West up 20%, Yorkshire and the Humber up 23% and the Humber up 21%.

For students, every penny counts and any rise in rental payments could seem significant and affect where they choose to study. However, this hasn’t dampened the appetite for a university education and a record number of students have looked to secure a place at University this year.

Scotland Student Accommodation in Crisis?

According to a BBC report this week, Scotland is facing a housing emergency driven by a shortage of suitable student accommodation and rising rental costs.

NUS Scotland has issued a warning that unprecedented demand has left some students without any suitable lodgings and have resulted in some students considering dropping out of their university course.

Some landlords have reportedly requested six months rent upfront, while others are waiting until COP26 is over as they can command high short-term rental fees during the climate conference.

With life getting back to normal for students and a return to in-class learning, the housing situation is causing concern for students and the NUS who has revealed that they have never experienced as many requests for support to help people find places to live.

NUS Scotland president Matt Crilly has written to the Scottish government to highlight these concerns and says:

“For many students, particularly those studying in the central belt of Scotland, there is currently a lack of safe and affordable accommodation, with purpose-built student accommodation full, shortages in the private rented sector, and landlords holding off to make a profit from COP26, I am concerned we have a student housing emergency.”

John Blackwood, chief executive of the Scottish Association of Landlords (SAL), said:

“We are seeing a chronic shortage of private rented accommodation across Scotland, partly as a result of landlords leaving the sector over the past couple of years which has reduced supply. In addition, landlords warned in 2017 that an unintended consequence of the Private Residential Tenancy (PRT) could be a reduction in accommodation available to students as landlords were no longer able to offer fixed-term leases which matched with term times. As a result, properties which landlords would hold back and market specifically for students are now rented by people as their primary home on a longer-term basis. One of the key aims of the PRT has been achieved but it is students who are suffering.”

Buy-to-let Options Rise

Amid the news that buy-to let is now 25 years old, it appears that the number of buy-to-let products on the market is higher today than the number available in March 2020 according to Moneyfacts.

Buy-to-let is 25 years old

In the 1990s when house prices were low, homeowners were reluctant to sell and instead turned to renting out their properties and essentially becoming an accidental landlord. At the time mortgage agreements prevented them letting their property and so ARLA worked with a small number of lenders to develop buy-to-let mortgages to support the private rented sector.

When prices went up, these accidental landlords sold their homes creating a void for tenants and more buy-to-let mortgages were made available.

Now, according to Savills, the UK’s private rental sector is worth around £1.338 trilion and the number of homes in the sector classed as ‘decent’ has gone from 53.2% in 2006 to 76.7% as of 2020, and the sector has almost doubled since 1996 with almost 13 million private renters in UK the market.

Buy-to-let options

According to Moneyfacts, the number of buy-to-let product options has risen above pre-pandemic levels. The number is currently higher today than available in March 2020 – 2,968 today compared to 2,897 before the pandemic. This is also the largest number recorded since October 2007 when there were 3,350 products available to landlords.

However, whilst the number of products is increasing, lenders are less likely to provide products to those with a low level of equity in their property. In March 2020 there were 32 products at 85% LTV, today there are 19. In addition, for this type of mortgage, the two-year fixed rate has increased from 4.7% to 5.61%.

 

What is Britain’s Dream Home?

A new study has revealed what Britain’s dream home looks like. Rightmove has carried out research to reveal what the nation’s favourite home would be, with practical rooms taking over luxuries such as gyms and swimming pools – with home offices, utility rooms and garages top of people’s wish list.

Property type

The pandemic resulted in an increase in demand for larger detached family homes in more rural settings. A cottage by the sea was the second most popular property type after a detached home. Two living rooms were the most popular request – one for guests and one for every day. In addition, a garage and garden were in high demand, with a garage used for either an additional room or storage space rather than somewhere to park the car.

A utility room was a must-have rather than walk-in wardrobe, gym or swimming pool showing that people have practical rather than luxurious requirements.

Working from home as a result of the pandemic has meant that people have a home office on their wish list and so require an extra room, whereas a conservatory is only popular among those aged 65 and over with this age group also desiring a bungalow rather than a large detached home.

The youngest age group of 18-24 of those surveyed wanted a dining room to entertain friends and in the next age group (24-44) a third bathroom was the most desirable feature.

Amenities

Surprisingly, Tesco has overtaken Waitrose as the most popular supermarket to live close to – although there were regional variations with more people in the south wanting to be close to a Waitrose and Sainsbury’s in the North.

When it comes to property listings on Rightmove, Tesco is the supermarket that is mentioned most by estate agents in listings, followed by Waitrose.

The most popular establishment to be near to the home was the humble pub followed by a local corner shop, coffee shop and a local market. Bakeries and restaurants were next on the national list, with local greengrocers and butchers being more popular than a local takeaway given the popularity of delivery companies such as Just Eat and Deliveroo.

The pandemic has resulted in a real shift in what people want from their homes – if you’re considering moving, talk to us at Newton Letting and register for property alerts.

Creating a Lush Garden in a Small Space

If you’re renting a property with a balcony, roof terrace or small garden, you might want to consider a vertical garden to help your walls come alive with greenery.

Living walls are one of the hottest gardening trends to emerge in recent years, increasingly making their way into residential gardens. Living walls are vertical gardens, where plants are rooted into a structure that is attached to a wall – creating a lush wall of foliage. What’s more, if you install it in the right way, you can take it with you when you move.

A living wall is fantastic for transforming any limited area outside – a balcony, terrace or patio garden. It also looks great when creating a more secluded area in a larger garden.

If you have a small garden, it’s an ideal space for a living wall making it appear more ambient, covering up unsightly walls or fencing. Greens and soft floral colours can make a limited outdoor space feel enriched and closer to nature.

Ideally you want to keep the area looking unstructured and as natural as possible. Use long grasses to add depth, ivy to provide coverage and foliage plants and annuals to create an abundance of green. Incorporate colourful bedding plants will provide an array of colour. Make sure you deadhead flowers to encourage new blooms and keep the colours thriving. When planting up the side of a wall of the home, make sure you use a waterproof membrane first to prevent damp.

If you want a simple solution choose pre-planted panels with living wall planters. This requires minimal effort as all the hard work is done for you. As an alternative, you don’t have to fill an entire wall – you could create a gallery wall with hanging baskets and pots attached – this will provide coverage and greenery without the commitment, and you can pots and baskets with you should you move home. However, check with your landlord if you will need to drill any holes as you may need to make them good before you move.

A living wall is easy maintain and simply requires watering around every two- three days in the summer.

No garden? A living wall isn’t just for outside – you can also achieve this look inside too.

Avoiding Potential Void Periods

One of the most crucial elements of your buy to let property is the rental income. Not only can it cover your costs including your mortgage repayments, but it can also provide a source of income and the ability to scale your portfolio.

At present, the UK average void period at the start of your investment is 20 days (Goodlord’s rental index). That’s why it may be worth exploring two options – choosing a property with tenants and choosing a new, pre-tenanted property.

A property with a tenant in-situ

According to recent research by Howsy, less than 1% of properties currently listed for sale across the UK have a tenant in situ, so they are a rare find. However, if you do manage to find the right one it can be extremely beneficial. By choosing a property that already has a tenant who is in a rental contract enables you to have immediate rental history which means you can better predict the return on your investment in the future. In addition, it means that the property will already have furnishings with no extras to pay for. Make sure you check how long the tenant has been paying the rent but also how long it has been since it was increased. With the current COVID situation you may choose to keep the rental fee the same depending on your tenants circumstances, but it will indicate whether they are paying the current market rate. If they are a good tenant and you want to keep them, it may be worth fixing the rent for a period of time.

Remember a good tenant is worth its weight in gold – you’ll have regular income, paid on time and a property that is well taken care of.

Pre-tenanted

This means that the property is newly built and the developer or agent has already agreed on the tenancies ahead of completion. Although a new property won’t have a rental track record, you can still do your due diligence to find out what the rental income will be and can predict how well it’s likely to perform.

One of the benefits of a pre tenanted property is that you have control over the rental income you will earn from the off. As a new property, the agents responsible for agreeing on pre-rentals will have marketed the property at the full market rate, so from the very start you should be able to make a great return.

If you want to avoid the initial void period, or want to guarantee a good tenant, buying with a tenant in place can prove to be a viable solution.

Current Eviction Rules in Scotland

As an emergency measure across the UK in response to the coronavirus pandemic, the government temporarily banned bailiff-enforced evictions and eviction notice periods were extended from two months to six months.

This ban put in place in March 2020 was intended as a short-term measure and in England has now come to an end. It has been extended several times to help tenants who have fallen into arrears with their rent payments during the pandemic.

Scotland

The eviction ban in Scotland has been extended until 30 September 2021 for areas that fall under level 3 or level 4 coronavirus restrictions. The situation is subject to review every three weeks. For areas in level 0, 1 or 2, evictions can be enforced.

As a tenant, your landlord is required to give you six months’ notice, or 28 days’ notice if there has been a breach of the tenancy agreement. If your landlord has decided to move in to the property themselves, the notice period is only three months.

In December 2020, the Scottish Government introduced the Tenant Hardship Loan Fund. If your employment or your ability to pay or rent has been affected by the pandemic and you are unable to pay your rent, you could be eligible for an interest-free loan. The amount of the loan will cover a maximum of nine months’ worth of rent arrears and is subject to an affordability assessment. The repayments will be deferred for six months and can be repaid over a five-year period.

Tips for Novice Landlords

If you’re considering taking a step into the world of property investment, it’s important to understand what makes a sound investment. From finding the right property in the right location to calculating yields and finding a great letting agent, here’s what you need to consider:

Investment budget

When purchasing a buy-to-let property you’ll need a good deposit and a mortgage (unless buying outright without a mortgage). Buy-to-let mortgages are more expensive than residential mortgages with higher interest rates and arrangement fees, and you’ll need to put down at least 25% of the property value.

Before purchasing the property, talk to local agents to find out how much you can expect to rent the property for. Mortgage lenders typically request that the rent covers 125% to 145% of the mortgage repayments.

It’s also important that you have enough money for void periods and maintenance. Talk to a mortgage broker to work out what you can afford and to discuss the mortgage application process.

Rental yield

It’s essential that you buy a property in an area with strong growth potential as well as a healthy rental yield. The rental yield is the measure of return – or how much you’ll earn from your investment. It’s calculated as a percentage of the value of your property – and as a rule of thumb, you should achieve a yield of 5% or more. This will depend on where you buy, the type of property you invest in, and how much you can expect to rent out the property for.

A rental income of £10,000 per year on a property costing £200,000 gives you a 5% yield. A rental income of £20,000 a year on the same property gives you a 10% yield.

With property in Glasgow generally falling below the UK average, this means that your rental yield will typically be higher.

Investing in Glasgow property

Glasgow has the largest economy in Scotland and the fourth largest in the UK. Much of Glasgow’s shipyard areas have been regenerated including the SECC, SSE Hydro arena, Pacific Quay and the International Financial Services District with a large number of offices. It also has one of the largest student areas with 27,000 students at the University of Glasgow with the largest campus in the West End, the University of Strathclyde with 21,500 students and Glasgow Caledonian University with 16,500 students.

According to Hometrack, Glasgow is one of the cheapest cities in the UK to invest in property with a fast time to let and good rental yields especially in Glasgow’s West End where demand is consistently high.

The West End is one of the most popular areas in which to live – it’s ideal for young professionals due to its proximity to the city centre, with a large campus and plenty of great bars, restaurants and independent shops it’s extremely popular with students, and there are several good schools in the area along with some beautiful period properties making it a good location for growing families. With its unique character, beautiful architecture and green open spaces, demand for property here is extremely high. Byres Road is the centre of the West End and popular areas including Hillhead, Dowanhill, Kelvinside, Broomland, Anniesland, Yorkhill, Finnieston, Partick, Garnethill and Hyndland.

Yields for G11 and G12 postcodes are around 5%, while in G13 they are around 6%.

Property type

Consider who you want to rent your property to – students, families or young professionals – and what they will be looking for. For example, professionals will want to be close to transport links, students will want to be close to amenities and college campuses and families will be looking at school catchments. Make sure you talk to letting agents about whether the property is suitable for your target tenants.

Draw up a list of areas, take a look at area guides and the latest housing index, and current rental values.

Using an agent

A good letting agent will not only help you to set a realistic rental income, they will also advise on getting your property rental-ready and ensure you have all the documentation required. They will also advertise the property, vet potential tenants, draw up the rental agreements, handle the deposits and collect the rental payments each month.

Talk to us if you are considering property investment or would like advice on letting out your property in Glasgow.

Which Properties Make the Most Money?

As a landlord it is important that you invest in the right property in the right area in order to minimise your void periods and maximise your income.

According to the latest research from Paragon in association with LandlordZone, HMOs produce the best yields at 7% followed by flats at 6.1%. This is followed by bungalows, terraced houses and semi-detached houses all at 5.9%, detached houses at 5.7% and flats that were individual units at 5.1%. There 800 landlords surveyed – some with one property and others with a portfolio with several.

It appeared that the larger the landlord’s portfolio the better the yield. In fact, those with 20 properties or more had a yield of 6.7% whilst those with one property had a yield of 4.2%. this demonstrates the importance of diversifying an investment portfolio.

In terms of landlords’ experiences of how Covid had impacted their business, just over 30% reported that they had experienced problems from the pandemic, but this wasn’t exclusively due to rent arrears. Rental income had been reduced the most by those who held a larger property portfolio.

The report also showed that terraced houses were the most popular property type among landlords with all portfolio sizes. This is followed by flats and semi-detached properties.

Larger portfolios enable landlords to invest in a broader range of property types and result in the best overall yields.

Talk to us at Newton Letting if you would like advice on the best properties to invest in and the rental returns you can expect to see in and around Glasgow.

High Demand for Buy-to-Let Mortgages

According to a recent report from Paragon, buy-to-let business among mortgage brokers is currently at a seven-year high. In a survey of almost 200 intermediaries, over half confirmed that they were expecting higher levels of buy-to-let business in 2021 compared to last year, with 21% of those surveyed expecting an increase of 10% or more.

Indicating an upturn in optimism compared to 2020 when we saw the UK experience unprecedented circumstances as a result of the pandemic, 2021 looks to be a fruitful year for both landlords and mortgage brokers in terms of buy-to-let mortgage activity.

Demand for buy-to-let mortgages is currently high, with just under half of brokers stating that the current demand is strong or very strong. Only 12% of those surveyed stated that demand was weak – this is the lowest number since before the start of the pandemic.

Brokers have an excellent grasp of current demand and seem to be able to predict how things will go over the coming months. This high level of optimism could be, in part, due to the stamp duty/LBTT holiday that was introduced in June but with the tax break ending recently in Scotland, high demand in the buy-to-let mortage market is underpinned by the longer-term demand for rental homes.

Latest House Price Index

The latest data released by Halifax has revealed that on a monthly basis, house prices in March were 1.1% higher than the previous month and over Q1 of 2021, they 0.3% higher than in Q4 of 2020. Year-on-year, house prices were 6.5% higher than in March 2020.

There was a fairly subdued start to the year but in March the housing market saw a resurgence with prices 1% higher compared to the previous month. Back in March 2020, no one could have predicted how well the property market would fare given the backdrop of the pandemic. It is expected that the high levels of activity will be maintained over the coming months with consumer confidence given a boost by a successful vaccine programme and buyer demand for larger properties with outside space.

Buy-to-Let Mortgages Flood Back to the Market

According to recent figures from Moneyfacts, buy-to-let mortgages have flooded back to the market in March with over 200 new products launched. As of April 3rd, there were 2,333 mortgages available to landlords. This is the highest number since the start of the pandemic when many lenders withdrew their products, and 233 more than the previous month marking a rise for the fifth consecutive month.

However, two-year fixed rates are currently 0.28% higher than this time last year.

Buy-to-let mortgage availability has now recovered to 81% of its pre-pandemic levels. In the residential mortgage sector, we have seen a 68% recovery. According to Hamptons International, there are currently just under two million outstanding buy-to-let mortgages in the UK.

In 2016, a large number of mortgages were completed as landlords rushed to beat the 3% stamp duty rise and many of these will be looking to remortgage over the coming months as their five-year fixed deals will be coming to an end. These landlords won’t want to revert to their current lender’s standard variable rate, as it will be typically higher.

Landlords will also be looking to buy new properties and in Scotland recently took advantage of the LBTT deadline at the end of March, and across the rest of the UK will be looking to buy within the end of June stamp duty deadline.

In the final months of 2020, around 15% of property in the UK was purchased by investors, with almost half of all investor purchases funded via a mortgage. Taking advantage of the raft of new buy-to-let deals will be existing landlords looking to refinance and those considering property investment for the first time.

Against this backdrop of the rising number of deals, buy-to-let rates have continued to rise. According to Moneyfacts, the average two-year fixed rate is now 3.05%, which is 0.28% higher year-on-year and the highest average recorded since June 2019.

The average five-year fixed rate deal is currently 3.415, an increase of 0.17% compared to the same time last year.

There are signs that buy-to-let interest rates may be starting to fall for those buying with larger deposits, or those with a good amount of equity in their existing properties. For example, the average buy-to-let two-year fixed rate mortgage for those with 40% equity has fallen from 2.52% to 2.14% over the past month. Lenders have been wary of the effects of the pandemic on landlords as many tenants have been furloughed, leading to them withdrawing high loan-to-value lending.

At present, lenders require the landlord to demonstrate that their rental income will cover between 125% to 145% of the mortgage repayments.

Although mortgage rates were lower before the pandemic than they are now, they are still very low from a historical perspective and some experts feel that they are unlikely to drop further. Five-year fixed rates have been popular in recent years as there are less stringent stress tests on these deals, enabling borrowers to take out larger loans.