Quality is set to become more important in the UK’s residential property market in 2013 and beyond according to experts in the sector. During 2012 there was the emergence of accidental landlords, that is home owners who could not sell their home and who decided to seek tenants, and a growth in the private rented sector because lack of mortgage finance resulted in fewer first time buyers being able to get on the housing ladder.
According to James Davis, chief executive officer of Upad, 2013 will be the year when landlords seek quality rather than quantity when it comes to choosing tenants. ‘Those who will look after their property, pay the rent on time and in full and be responsible renters are sure to be preferred by landlords and I foresee full tenant referencing and rent guarantee agreements becoming the norm,’ he said, ‘One of the biggest trends we saw in 2012 was a shift in landlord behaviour; the acceleration away from traditional agents to self managing channels as landlords become more demanding in terms of levels of service and keen to maximise yields. Online classified listing sites, catering for the self managing landlord have doubled their business in the last 18 months whilst market leading portals such as Rightmove and Zoopla have seen a 10% decrease in stock levels this year as landlords look to go it alone’ he explained.
‘As a landlord myself, I will be keeping a firm eye on interest rates as they are only going to go one way and sooner rather than later I suspect. In terms of expanding my portfolio, I’ll be looking at towns and cities such as Oxford, Brighton, Swansea and Leeds but ensuring that I don’t overpay on acquisitions and seek both capital growth and rental income potential,’ said Davis.
He also believes that an increase in rents across the UK will start to affect ability to pay, addng, ‘There will inevitably come a tipping point where rents will become unaffordable and landlords should be aware of this. Indeed we at Upad have seen landlord confidence fall by 8% since the start of the year and concerns over rent arrears and defaults due to job insecurity and rising rent costs coupled with increasing mortgage payments are very real for today’s landlord’ he added.
Quote from PropertyCommunity.com : “UK Tenant eviction specialists, Landlord Action, have successfully collected outstanding rental arrears of £92,000 for a single property, the largest case they have been instructed on since their inception in 1999.”
Also, according to Caroline Kavanagh, managing director of Townends Lettings and Management who operate primarily in London, Surrey, Middlesex and North Hampshire, the growth of accidental landlords is expected to slow. At the beginning of 2012 a spring lift in residential sales encouraged some accidental landlords to test their properties on the sales market, but this brief stint was followed by a fair few returning to lettings only a few months later, Kavanagh explained.
Now as 2012 comes to an end she believes that the benefits of becoming a professional landlord in the south of England are increasingly apparent and outweighing any desire to sell. As a result, it is unlikely there will be an influx rushing to sell next year but rather decisions will be based on individual circumstances. ‘Equally, it’s unlikely there will be a further flurry of accidental landlords as we appear, for now, to have reached a new norm in an overall more stable sales market,’ she said.
She also pointed out that the high demand and lack of stock which, over the past 18 months, has forced rapid rent rises in the areas within which we operate, ranging from between 10% and 30%, were simply not sustainable. ‘In 2013 key elements such as price versus location versus property condition will drive the market, and as affordability continues to impact tenants we will see even more taking an open minded approach to making a sideways move in order to find something cheaper or avoid a rise’ she said.
Overall Caroline Kavanagh expects 2013 to remain a positive time to be a landlord, ‘We anticipate seeing many existing landlords re-investing and widening their portfolios. It’s possible these more stable rent levels could be sustained throughout much of 2013, with the exception of pockets of the market which consistently outperform others’ she added.