Welcome to NestInsights, your guide to the evolving UK property market. In this blog series, we explore the latest property news and developments that shape the sector, offering you the insights needed to navigate and thrive. Our goal is to provide a comprehensive overview that empowers you to make well-informed decisions in this dynamic market.
Table of Contents
Chancellor Introduces Compulsory Housebuilding Goals
BTL Landlords Advised to Approach 'Safer Renting' Initiatives Cautiously
Rate-Setter Advocates for Maintaining Interest Rates in August
Renters Identify Top 'Deal-Breakers' in Rental Properties
New Government Cautioned Against Eliminating Section 21 Evictions
Increasing Delays in Property Transaction Processes
UK Property News Week 28
Chancellor Introduces Compulsory Housebuilding Goals
Chancellor Rachel Reeves has announced the reintroduction of mandatory housebuilding targets. This initiative aims to significantly boost the nation's housing supply, with a target of constructing 1.5 million new homes over the life of this Parliament. This ambitious goal includes provisions for both private and socially rented homes, reflecting a comprehensive approach to meeting diverse housing needs.
The Chancellor's announcement underscores a commitment to overcoming the longstanding barriers that have hindered housing development. Reeves highlighted the necessity of loosening planning restrictions that have previously stymied construction efforts.
By streamlining the planning process, the government hopes to expedite the development of essential infrastructure and the energy grid, thereby facilitating the swift construction of new homes.
Reeves articulated a clear message:
“Homeownership is going backwards. It’s gone backwards in the past few years. Britain today has lower homeownership than it should, and the Labour party – this government – want to be the party of homeownership. But we also know that social housing is an important part of the mix, and will be included in the 1.5 million new homes [over the life of this Parliament].”
The quantitative target of 1.5 million new homes translates to an annual goal of approximately 300,000 new homes.
This target is ambitious yet essential, given the current deficit in housing supply. As of March 2024, the time taken to exchange contracts on property sales has extended significantly, with only 29% of transactions progressing from offer acceptance to exchange within 12 weeks, down from 78% in 2016. This slowdown highlights the urgent need for systemic reforms to expedite housing transactions and increase overall market efficiency.
To ensure these targets are met, the Chancellor emphasized the importance of leveraging brownfield and greybelt land for new developments. Deputy Prime Minister Angela Rayner will oversee efforts to prioritize these areas, ensuring that local planning authorities align with national housing objectives.
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BTL Landlords Advised to Approach 'Safer Renting' Initiatives Cautiously
Buy-to-Let (BTL) landlords are increasingly being encouraged to participate in 'Safer Renting' schemes promoted by various councils.
While these initiatives aim to enhance tenant safety and improve housing standards, industry experts urge landlords to approach them with caution due to potential hidden pitfalls.
'Safer Renting' schemes are designed to ensure rental properties meet high safety standards and that landlords comply with regulatory requirements. These schemes often involve landlords voluntarily signing up to a set of standards and disclosing information about their properties.
The primary goal is to create a safer and more transparent rental market for tenants.
However, Phil Turtle from Landlord Licensing & Defence highlights several concerns. Turtle warns that participating in these schemes could inadvertently expose landlords to legal and financial risks. One significant concern is that the information provided by landlords may be used against them if it reveals non-compliance with certain regulations.
Potential Risks for Landlords
Disclosure of Information: By joining a 'Safer Renting' scheme, landlords may be required to disclose detailed information about their compliance with various safety and regulatory standards. This information could potentially be used by councils to identify non-compliant properties and take enforcement actions.
Incomplete Information: Councils may not have complete records of all properties owned by a landlord. By voluntarily providing information, landlords might inadvertently fill in gaps that could lead to future investigations and enforcement actions.
Unclear Use of Data: The storage and use of collected data are often not clearly defined in these schemes. Landlords may not be fully aware of how their information could impact them in the future. This lack of transparency poses a risk of unforeseen legal complications.
To navigate these challenges, experts recommend that landlords take the following steps before participating in any 'Safer Renting' schemes:
Review Scheme Requirements: Carefully examine the requirements of the scheme and understand how the information provided will be used.
Consult with Specialists: Engage with a specialist in landlord housing law and compliance to fully understand the potential implications of participating in the scheme.
Maintain Detailed Records: Keep meticulous records of all property maintenance, inspections, and tenant communications to defend against any future allegations.
Rate-Setter Advocates for Maintaining Interest Rates in August
Jonathan Haskel, a member of the Bank of England's Monetary Policy Committee (MPC), has advocated for maintaining the current interest rate of 5.25% in August. This stance is crucial as it highlights the delicate balance the MPC must strike between controlling inflation and supporting economic growth.
Haskel’s position is grounded in the need for more certainty that inflationary pressures have sustainably subsided. Despite recent figures showing a slowdown in inflation to the Bank's target of 2%, Haskel remains cautious, citing concerns over the tight and impaired state of the UK’s labour market. He emphasized:
The labour market continues to be tight, and I worry it is still impaired.
This caution reflects the complexities of economic recovery post-pandemic and amidst global economic uncertainties.
The decision to hold the interest rate at 5.25% comes after a period where rates have been at a 16-year high. This high rate has been a tool to slow down rising consumer prices but has also led to increased borrowing costs, including for mortgages.
Financial markets had priced in a 60% chance of a rate cut in August, a reflection of the anticipation and hope for relief among borrowers and the housing market.
Despite this anticipation, some lenders have already started to slightly lower their mortgage rates in response to the slower pace of inflation. However, Haskel's caution suggests that any significant changes to borrowing costs might still be some way off. This is particularly important for the housing market, where mortgage rates play a critical role in affordability and buyer sentiment.
Renters Identify Top 'Deal-Breakers' in Rental Properties
In the competitive rental market, understanding what prospective tenants consider as 'deal-breakers' can significantly enhance a landlord's ability to attract and retain quality tenants. Recent research by Barclays Property Insights has highlighted the top factors that renters deem non-negotiable when selecting a rental property.
Addressing these concerns can help landlords improve their properties’ appeal and reduce vacancy rates.
Key 'Deal-Breakers' for Renters
The study reveals that almost half of the renters (46%) consider the presence of damp and mould to be a top deal-breaker. This underscores the importance of maintaining a clean and healthy living environment. Ensuring that properties are free from damp and mould not only meets tenant expectations but also preserves the property's integrity and value.
Other critical factors include the availability of a living room, with 34% of renters listing it as essential, and access to private outdoor space, which 32% of renters find necessary.
Additionally, 32% of renters also emphasize the importance of double-glazed windows. Double glazing helps retain heat and reduce energy costs, making it an attractive feature for cost-conscious tenants.
Top 10 Deal-Breakers for Renters:
No damp/mould present - 46%
Living room/lounge - 34%
Private garden and/or outdoor space - 32%
Double glazing on windows - 32%
Fast internet/broadband capabilities - 24%
Pets allowed - 23%
Off-street parking - 21%
Large bedrooms - 17%
Likeability of landlord or property agents - 17%
Privacy from neighbours/isn’t overlooked - 16%
Implications for Landlords
Landlords aiming to attract and retain tenants should prioritize addressing these deal-breakers. Here are some actionable steps:
Maintain Property Health: Regularly inspect and address issues related to damp and mould. Investing in good ventilation systems and timely repairs can prevent these problems.
Provide Essential Amenities: Ensure that properties have a designated living room and consider enhancing outdoor spaces to create a more attractive environment for tenants.
Upgrade Windows: Installing double-glazed windows can make a significant difference in tenant satisfaction by improving insulation and reducing noise.
Improve Connectivity: High-speed internet is increasingly seen as a necessity rather than a luxury. Landlords should ensure their properties are equipped with fast and reliable broadband.
Pet-Friendly Policies: With 23% of renters wanting pet-friendly accommodations, considering pet policies can widen the pool of potential tenants.
New Government Cautioned Against Eliminating Section 21 Evictions
As the new government considers significant reforms in the rental sector, there has been growing concern regarding the proposed abolition of Section 21 evictions. Propertymark, a leading industry body, has issued warnings highlighting the potential repercussions of such a move without an adequate replacement mechanism.
Section 21 of the Housing Act 1988 allows landlords to reclaim their property from tenants without providing a specific reason, provided they follow the correct legal procedure. This process, often referred to as a "no-fault" eviction, offers landlords a relatively straightforward way to regain possession of their property. However, its potential abolition aims to provide greater security for tenants, reducing the risk of sudden displacement.
Propertymark's primary concern is that abolishing Section 21 without a suitable alternative could overwhelm the court system. Currently, Section 21 evictions can bypass lengthy court procedures, allowing for quicker resolution compared to the Section 8 process, which requires landlords to prove specific grounds for eviction such as rent arrears or antisocial behavior.
Nathan Emerson, CEO of Propertymark, emphasized the importance of maintaining a balance between tenant protection and landlord rights. He stated:
Any new Bill must strike a balance between protecting tenants’ rights and ensuring that landlords have a suitable legal mechanism to repossess properties when necessary.
The potential impact on the rental market is significant. Many landlords are already feeling the strain from regulatory and financial pressures. The abolition of Section 21 could further discourage property investment, leading to a decrease in available rental properties. This reduction in supply could, in turn, drive up rental prices, exacerbating the housing affordability crisis.
Moreover, Propertymark has reported that many landlords are considering exiting the rental market due to the uncertainty and increased risks associated with the proposed changes. This sentiment is echoed by letting agents and industry stakeholders who fear prolonged vacancy periods and increased administrative burdens.
For the proposed abolition to be viable, it is crucial that the government introduces a robust and efficient alternative. This alternative should ensure that landlords can reclaim their properties in a timely manner while protecting tenants from unjust evictions. A well-structured Section 8 process could be part of this solution, provided it is adequately resourced to handle the increased volume of cases without causing significant delays.
Increasing Delays in Property Transaction Processes
In recent years, the time taken to complete property transactions in the UK has seen a significant increase. According to Propertymark’s Housing Insight Report, the proportion of property transactions that progress from offer acceptance to exchange of contracts within 12 weeks has drastically declined from 78% in March 2016 to just 29% in March 2024. This trend has become a growing concern for buyers, sellers, and industry professionals alike.
Key Factors Contributing to Delays
The extended transaction times can be attributed to several factors:
Increased Administrative Burden: Successive legislative changes have introduced more paperwork, which has significantly slowed down the transaction process. The existing system, originally designed for much smaller amounts of information, now struggles to handle the increased volume of documentation required.
Resource Constraints: A shortage of solicitors and other key professionals involved in the transaction process has been a major issue. 59% of agents reported that solicitor resource constraints were the primary reason for extended exchange times. The under-resourcing extends beyond solicitors to surveyors, banks, and local authorities, all of which play crucial roles in the property transaction process.
Technological Adoption: While technology has the potential to streamline processes, its adoption has been inconsistent. Some solicitors have embraced digital methods, while others continue to rely on outdated, manual processes. This inconsistency contributes to delays and inefficiencies.
Local Authority Delays: One of the most significant bottlenecks in the transaction process is the delay in obtaining local authority property searches. These searches are critical for identifying any issues that might affect the property's value or future use, and delays here can significantly extend the overall transaction time.
Impact on the Market
The increasing delays in property transactions have wide-ranging implications for the housing market:
Buyer and Seller Frustration: Extended transaction times can lead to frustration and anxiety for both buyers and sellers. The uncertainty of prolonged processes can result in financial strain, especially for those dependent on timely transactions to manage their finances or move plans.
Economic Impact: The property market is a vital component of the UK economy. Delays in transactions can slow down market activity, impacting everything from estate agent revenues to moving services and furniture retailers.
Housing Supply: Prolonged transaction times can deter potential sellers from putting their properties on the market, further tightening the supply of available homes and potentially driving up prices due to scarcity.
Proposed Solutions
Addressing these delays will require a multi-faceted approach:
Streamlining Processes: There is a pressing need to modernize and streamline the property transaction process. This includes adopting consistent digital practices across all stakeholders to reduce administrative burdens and expedite information flow.
Increasing Resources: To tackle the resource constraints, there needs to be an investment in training more solicitors and other professionals involved in the transaction process. Improving the working conditions and compensation for these roles could also help retain talent and improve efficiency.
Improving Local Authority Efficiency: Efforts should be made to enhance the efficiency of local authority property searches. This could involve additional funding, staff, and the implementation of more robust digital systems to handle search requests more quickly.
Policy Reforms: Policymakers need to engage with industry stakeholders to understand the challenges and develop effective reforms. This collaborative approach can ensure that new regulations do not unintentionally add to the administrative burden and that existing laws are streamlined.
Conclusion
This week's edition of NestInsights covers key developments in the UK property market. From the Chancellor's new housebuilding targets to advice for BTL landlords on 'Safer Renting' schemes and the decision to maintain interest rates, we aim to provide a clear overview of the current landscape.
By understanding renters' top deal-breakers, landlords can improve property appeal and retention rates. The potential abolition of Section 21 evictions also highlights the need to balance tenant security with landlord rights. Additionally, the increasing delays in property transactions call for urgent reforms to streamline processes and improve efficiency.
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