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The Brief.

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Contents

Welcome to The Brief, a fortnightly showcase of some - just some - of the more interesting revelations from the property investment sector. the property investment sector. Exclusively for Members, we'd like to think The Brief evolves with each edition to bring you more of what you'd like to see - be sure to give us your honest, blunt feedback and, as always, we'll do what we can to continually improve...continually improve...

Danny BanceManaging Partner

USING YOUR LOAFLandlords enjoy higher rental yields

HOME STRETCHFewer new build homes in London

BRINGING HOME THE BACONPrime central London property prices tipped for 6% rise in 2012

IN A CLASS OF ITS OWNInvestor demand for student homes soars

HOUSE RULESTenants favour accredited landlords

SIGN OF THE TIMES?Newham to license all 35,000 private rentals in the borough

IPIN'S LATEST11th UK application of the Secure Exit Strategy™. Find out more here!

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Landlords enjoy higher rental yieldsHowever, more than a third (36%) believe tenant demand is growing. Professional landlords are more likely to think that demand is increasing – 39% compared to 27% of smaller-scale landlords.

Looking ahead, 44% of landlords expect Looking ahead, 44% of landlords expect tenant demand to increase over the next 12 months.

A fifth of landlords are on the investment trail with 21% planning to purchase buy-to-let property in the third quarter.

John Heron, managing director of Paragon John Heron, managing director of Paragon Mortgages, said: “Strong tenant demand has continued to place upward pressure on rents and we have as a result seen yields strengthen despite the pressure on consumers.

“It is no surprise to see that more “It is no surprise to see that more experienced landlords achieve better yields with this being driven by their choice of property type and their approach to management.”

Landlords continue to reap the rewards of their investments with rental homes being snapped up by eager tenants helping to push up rental values and yields – a property portfolio’s annual rental income as a percentage of its total value – in the process.

The PRS Trends Survey, commissioned by The PRS Trends Survey, commissioned by specialist buy-to-let mortgage lender Paragon Mortgages, revealed that landlords achieved an average yield of 6.5% in the second quarter (Q2) of this year. This is an increase on Q1 where the average was 6.2%, and on the same time period last year where the average yield was also 6.2%.where the average yield was also 6.2%.

Professional landlords achieved the greatest rental yield of 6.9%, on average, in Q2 compared to 6.5% in Q1.

Landlords were asked for their views on current levels of tenant demand; just over half (55%) of landlords said that, for the moment at least, demand appears to be stabilising.

Using your loaf

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The survey, which counts every scheme with over 50 new homes under construction across Greater London, reveals that there were just 35 new large property schemes consisting of about 3,700 new homes recorded since the last survey six months ago.

This marks a major drop from the 81 new This marks a major drop from the 81 new schemes during the corresponding period last year, incorporating over 7,000 new homes, and 55 developments six months ago.

In stark contrast to the fall in housing starts, In stark contrast to the fall in housing starts, there has been a rise in the number of residential property developments nearing completion in London as a consequence of the hike in new home starts recorded 18-24 months ago. According to the survey, approximately 7,300 new homes were complete, an increase of 50% from the last complete, an increase of 50% from the last survey, with a large chunk of those properties (30%) situated in East London.

There has been a significant decline in the volume of new housing developments starting in London adding to the supply-demand imbalance in the city, according to Drivers Jonas Deloitte's latest London residential crane survey.

“Schemes started in the more buoyant 2010/11 period are now progressing through to delivery, meaning current completion levels are looking more healthy,” said Anthony Duggan of Drivers Jonas Deloitte.

He added: “Our data shows that He added: “Our data shows that developers are focussing their activity on the more resilient Inner London areas, which is indicative of rising caution with regard to the health of domestic buyers and also the continued confidence in the prime markets and overseas buyers.”

Current completion levels are looking more healthy…

Fewer new build homes in London

Home stretch

The property group projects that the average price of a home in the heart of the capital will increase by 6% this year in stark contrast to the rest of the UK.

Data produced by CBRE show that the average price of a property in prime central London has risen by 35% over the last three years and is now 16% above the 2007 peak.

In terms of new build property prices, the report reveals that London can only be In terms of new build property prices, the report reveals that London can only be matched by high-end markets in Monaco and Hong Kong. Prime homes in the capital are typically achieving between £1,500 and £2,500 per square foot, while exclusive super prime properties are selling for in excess of £3,000 per square foot.

The residential property market in prime central London will continue to defy the recession, with prices expected to appreciate further, according to research by CBRE.

Bringing home the bacon

“London’s limited source of developable land means that supply will almost never satisfy demand,” he added.

Property price growth in London is mainly being supported by a severe housing shortage and strong demand from overseas buyers.

“Superprime residential markets have emerged as one of “Superprime residential markets have emerged as one of the only secure investment options for the world’s super wealthy,” said Mark Collins, head of residential, CBRE.

“The very top-end of the market remains exclusive, involving only a handful of cities, and within this elite group London is still one of the most compelling choices.”

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Supply will almost never satisfy demand

Prime central London property prices tipped for 6% rise in 2012

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Yolande Barnes, head of Savills research, commented: “Student housing is widely considered to be a new or alternative sector, but it has outperformed many commercial property asset classes over the past five years, with average blended annual yields approaching 6%.

Its appeal to investors looking to offset riskier Its appeal to investors looking to offset riskier assets with a more defensive asset strategy cannot be overstated, particularly against the current economic backdrop.”

The report states that investors are taking advantage of opportunities arising from a lack of bank finance and uncertainty regarding university funding.

Investors are ultimately attracted by the high Investors are ultimately attracted by the high returns potentially achievable in the student housing sector which has outperformed many other areas of the property industry in recent years.

Demand from property investors seeking solid, income-generating assets within the student property division has doubled over the past 18 months and the sector is now worth over £2 billion a year, according to a report ‘Spotlight on Student Housing’ published by Savills.

By 2020 the cumulative fall in the 18-20 demographic is projected to fall by 358,000 from its high of 2.48 million in 2010.

Furthermore, international student demand Furthermore, international student demand for UK university places is expected to increase by 30,000 within the next eight years provided UK immigration policy allows for this growth, and the distribution of this demand will be key."

Barnes continued: “Universities with a track Barnes continued: “Universities with a track record of attracting high calibre international students will be those catching the eye of investors.”

Concern that the rise in student fees would deter many students from going to university has so far proved unfounded with numbers actually rising. Total applications for the age groups of 18, 19 and 20 which account for 75% of all applications are already well over 90,000 ahead of the number of degree place acceptances in 2011 number of degree place acceptances in 2011 for the same age group. Longer term, investors should also scrutinise domestic demographic changes.

In a class of its ownInvestor demand for student homes soars

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House Rules

The NLA survey of 2,000 tenants reveals that 51% of those renting would rather rent properties from landlords that have a thorough understanding of the rules and regulations for the letting of residential property.

The findings from the research will please the NLA as it The findings from the research will please the NLA as it offers a national scheme that tenants in England and Wales can recognise as a mark of quality, signifying that a landlord is committed to professional development. The scheme is also backed by free and regular local meetings, which can count towards development.

Despite the benefits of accreditation, only 19% of tenants Despite the benefits of accreditation, only 19% of tenants know whether or not their landlord is a member of a landlord association.

David Salusbury, Chairman of the National Landlord Association, says: “Accreditation is an effective way for landlords to develop their professional capabilities and, as our research shows, is a credible tool for marketing to tenants.to tenants.

“Accredited landlords are required to dedicate time to “Accredited landlords are required to dedicate time to attending courses and local meetings and to commit to continued professional development. This investment in time and knowledge is what sets accredited landlords apart from the rest – they have knowledge of the various acts of parliament as well as the local regulations that apply to their properties and tenants.”

More tenants are likely to accept a rental property if they know the landlord is committed to professional development and accreditation, according to the National Landlord Association’s (NLA) first Quarterly Tenant Index.

Tenants favour accredited landlords

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Newham Council says that it made the decision to license landlords after holding a series of public consultations with residents, private sector tenants, landlords and lettings agencies: 74% of residents and 76% of private tenants supported the scheme.

Under the new scheme, private landlords will be required to pay £150 Under the new scheme, private landlords will be required to pay £150 for a five-year licence if they register before the end of this year, otherwise the full fee is £500. Landlords who fail to get a licence face fines of up to £20,000.

Newham Mayor Sir Robin Wales commented: “It is clear from our consultation that our residents, including tenants in private sector homes, back our plans.

“There are good landlords in Newham and we want to work with “There are good landlords in Newham and we want to work with them. Unfortunately there are also some unscrupulous ones, which these proposals would target.”

The new scheme has been welcomed by Shelter.

Kay Boycott, Shelter’s director of communications, policy and Kay Boycott, Shelter’s director of communications, policy and campaigns, said: “We are delighted that Newham Council will be introducing this scheme, which will help protect vulnerable tenants from rogue landlords who are making their tenants’ lives hell.”

However, Newham’s decision to license all private landlords has been slammed by the National Landlords Association (NLA).

Chairman of the NLA, David Salusbury, said: “They [Newham Chairman of the NLA, David Salusbury, said: “They [Newham Council] will only increase the burdens on those who already comply with the law, without having any bearing on those who blatantly ignore it.”

The London Borough of Newham plans to license all private landlords from 1st January 2013 which will cover an estimated 35,000 private tenancies, representing one in three of all the borough’s households.

Newham to license all 35,000 private rentals in the borough

Sign of the times?

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