Welcome to our Winter Newsletter 2021
The team at Landlord Broadband hopes that you enjoy the newest edition of our quarterly newsletter. If you would like to read our industry news and customer market updates from the last quarter, click here.
Reports indicate that the governments green efficiency plans may be pushed back a year. Resulting in landlords having more time to make their rental properties energy efficient. The proposed set back would mean that Landlord’s will have until 2026 to reduce their rental property’s minimum energy performance certificate to a band C. However, despite this delay, the planned deadline for existing tenancies EPC’s to be upgraded will remain 2028 (Landlord Today).
Now for a bit of fun news for a change! A 19-year-old law student from East Anglia has won a legal case against his landlord using just his textbooks for help. When Jack Simm arrived at his university halls, he found what he described as a ‘building site’ instead of the luxury accommodation that he had been promised. The young student set about collecting witness statements and sued for breach of contract, eventually winning the first case of his career (BBC).
The finance market has been as dynamic as ever over the past few months. Quarterly house-price inflation is at its highest level since 2006, according to reports from Halifax. The impact of the rise in prices has had a huge impact on Scotland. The average house now costs £191,140, the highest average on record. The average UK house price has risen to £272,992, after five months of continuous growth due to the temporary break from stamp duty payments. (Property Reporter).
Another salient story is the Bank of England’s proposal to drop its affordability test for mortgages; a measure introduced in 2014 to manage market risk. Why? Officials are tidying up policy. The Bank of England now believes that the affordability test prevents less than 1% of buyers from purchasing. This change means that banks will be able to offer larger mortgage loans to those considered creditworthy, however this is likely to remain within 5.5 times income to manage risk. The benefit? It may give the housing market in areas with high barriers to entry, such as London and the Southeast, an uplift (Financial Times).
The rental market continues to receive further investment. The Chief Executive of Lloyds bank is considering quadrupling the budget of their Property Investment arm, Citra Living. This would raise the funding from £250m, to £1bn and would fund its strategic initiative of owning 10,000 residential rental properties by 2025, and up to 50,000 by 2030. This is all while maintaining net-zero initiatives and Nunn has employed an ESG-focused investment banking team (Financial Times).
Investment in PropTech has reached record levels of £1.6bn in 2021, with an estimated 360% increase on that of 2020. This may be due to the realisation of changes that need to be made to reach net zero targets, and M&A activities. Due to the higher levels of adoption, however, many PropTech companies are growing and 2022 may present further opportunities for funding and M&A activities to provide further investment (Property Week).
PropTech Start-up Ark, which provides a lifestyle app to create communities for social housing tenants, has signed a deal with Urban Splash. This will mean integration among 1,000 homes across developments in Sheffield, Manchester, and Birmingham. Ark’s platform intends to have a positive impact on tenants’ experience within their neighbourhoods (Property Week).
Sustainability has been a ‘hot topic’ this quarter. With new EPC regulations that are being brought into force by the government, many landlords have been prompted to quit the business. Currently, BTL Properties must have an energy rating of E. The Government plans to change this to C by 2025. Landlords with larger portfolios are more likely to consider selling. This is due to higher costs associated with making necessary changes (Landlord Today). On average, the new regulations mean that retrofitting a property to meet the requirements may cost a national average of £24,000. Therefore, it represents more of the value of lower cost properties (NRLA).
According to research by the NRLA, rental demand is at an all-time high. This shows the beginning of the housing market recovery after COVID-19. 68% of landlords outside of London report an increase in demand, in comparison with 54% within the capital. However, due to this increased demand, RICS has warned of a ‘mismatch’ between supply and demand.
In terms of COVID rent arrears, the situation is beginning to seem more positive. Tenants in arrears have decreased from 7.0% in May, to just 3.7%. However, this should be approached with caution, as those who are still in arrears are beginning to see debts rising. NRLA chief Ben Beadle emphasised the need to sustain tenancies and help those who need it. He stated: “With the government having made funding available for affected tenants it is now vital that councils get this to those affected renters as swiftly as possible” (Landlord Today).
Build to Rent
The Build to Rent (BTR) market has grown rapidly over the final quarter of the year. There are over 140,000 homes currently in the construction or planning stages (Property Industry Eye). Most of these new homes will be built in the 20 cities identified by the governments increased housing target project. These cities include London, Birmingham, Liverpool, Bristol, Manchester and Sheffield.
One of the most prominent developments of the quarter was Grainger PLC’s acquisition of two sites in Exeter and Sheffield. Constructing Build to Rent properties was the sole purpose of buying these sites. The project will supposedly deliver at least 480 new homes across the two regions (BTR News). In other news, Telford Homes and Legal & general have set up a forward funding deal for a new Build to rent development in London. The development will be based at International Way, a short distance away from Stratford station. It will deliver 247 BTR homes along with 54 discounted rent homes worth around £150m (BTR News).
Looking ahead to the new year, we can expect a strong start to 2022. Early indications predict that we will see a rapid increase in the suburban Build to Rent market. This is because developers will begin to re-evaluate their target markets. Predictions indicate that next year BTR projects will focus on catering to older adult and family markets. This is rather than the more traditional young professional audience (BTR News). This development is particularly encouraging. The untapped potential of the suburban BTR market will help the property industry to survive the end of the Help to Buy scheme which has sustained the market over recent years.
As the year drawers to a close, it is increasingly evident that 2021 has been a year of significant confidence return for the UK’s Purpose-Build Student Accommodation sector. Although 2020 was a crushing year for the student market, 2021 has been a different story altogether. According to a recent Savills report, Unite, the country’s largest PBSA operator, achieved a 94% rent collection this year. This is a promising sign of the market returning to normal. In addition to this, there has also been a return to high occupancy levels across the market in general, as both domestic and international students have begun to return to campus (Savills).
With things looking more optimistic, quarter four has been a period of intense investment in the PBSA market. Notable projects include the Study Inn Groups’ plans to deliver a new student housing project in Nottingham. The £35m luxury accommodation will be called Triumph house and will home around 270 University of Nottingham students by 2023 (PBSA News). Further to this, Deeley construction have started work on a £5.4m development of the Old Bakery site in Twerton, Bath. Planning permission was agreed in September 2019. The project is expected to be completed in time for summer next year (PBSA News).
The good fortune in this sector looks set to continue into the new year. Recent reports suggest that there will be 240,000 more university applicants next year (Savills). This is extremely encouraging as it will dramatically increase the demand for student accommodation over the next few years.
An inquiry into second homes, the impact of them and the government’s actions has been launched by the Senedd Committee (Nation Cymru). The impact of second homes was subject to much debate last quarter. The public’s opinion on Wales’s ‘three-pronged attack’, will be very interesting to hear. Especially after their oral statement on ‘Second Homes and Affordability’ (Senedd Wales). It is possible that the creation of holiday lets and second homes could be subject to regulation by councils in the future (Property Industry Eye).
Scottish residents are still struggling to get on the property ladder due to second homes and holiday lettings. Tourism, despite being a necessity, is affecting the affordability of homes and these issues are being exacerbated by the pandemic. £43 million has been allocated to be used to build affordable homes (Guardian). Furthermore, short-term lets need to be licensed by councils by October 2022 (the Scotsman). The impact of these changes may help England, Wales and Ireland to from legislation that can tackle their short-term letting issues.
Previously, the Welsh government pledged to build 20,000 new social homes, but there are fears that supply issues due to the pandemic will prevent this goal from being achieved (ITV News). The Welsh government recently released a consultation for a ‘high level action plan’ to end homelessness between 2021 and 2026. Responses pertained to the plan and its possible effectiveness. The summary of responses showed that most respondents agreed that the key focuses of the action plan were correct. The prevention of homelessness is fundamental to the plan (Gov.Wales).
In England, the ‘quality and regulation of social housing’ is being examined by the Housing, Communities and Local Government (HCLG) Committee (UK Parliament). Their findings will help to identify what problems need to be address and if they can be solved.
Following COP26 and the effort to reach net zero, the Scottish Federation of Housing Associations stated in their survey that 70% of respondents building new homes are using sustainable methods (Scottish Housing News).
Social landlords and tenants have access to £2 million in funding to help tackle fuel poverty (Scottish Housing News). Fuel poverty is a term that describes when a household cannot heat a home adequately (End Fuel Poverty).
Meet the Team
Meet Andrew Simpson, CEO of Landlord Broadband “I have a passion for all things PropTech and I’m interested in how technology will support the various elements of the property market in the future.” Andy has a young family so much of his spare time is spent transporting them to extracurricular activities. He likes most sports and follows Leeds United.
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