The political situation in the UK is confusing because although we had voted to leave the EU there is now no clear path to how this might happen. It is still no clearer as I write because the decision on the withdrawal agreement has been delayed until 31st October 2019, so this gives politicians plenty of time to procrastinate and still get no decision.
As a business working for our clients in London, our hope is that our politicians create some certainty over the next few months but my concern is that the leave date will be extended even further which will only prolong the uncertainty; the property market needs to know where it stands and I believe the most likely outcome is currently another referendum at some point later this year, and the outcome of that vote is by no means predictable
In the meantime we get on with our lives and there is activity in the market place:
Examples of sales agreed before Christmas were as follows:
- Vauxhall leasehold flat purchase completed at £3.75 million GBP; acting for a purchaser but not a lot of choice was available.
- Chelsea and Kensington leasehold flat agreed at £2.82 million GBP ; who says there are no buyers above £1 million GBP !
- Putney SW15 Leasehold sale agreed at £785,000 GBP ; there were 2 competing buyers !
- Willesden Green NW10 Leasehold sale agreed at £420,000 GBP
Now we don’t want to overstate this data because to achieve these sales (and more) it has been all about getting the asking price correct, and making sure the price is attractive to buyers. However, it is clear that there are buyers available for people who want to sell.
Lettings agreed have also been strong and renewals averaged a 2.44% increase in 2018, whilst this has improved in 2019 such that last month the average increase is now 4.4% at renewal.
NW10 lettings from 2017 to 2018 showed between a 5% and 7% uplift in the summer for flats all in the same development.
N1 we let 26 flats in a new development with 16 studios and 10 1 bed and 2 Bed flats. The average rental was £1956 GBP pcm with void periods low. On the first re-lets we are now pushing the rental higher in 2019 and we expect a minimal void period.
SW1 Letting agreed at £12,500 GBP per month….a company record!
The first quarter has started well with over 65 new properties on the market for rental and void periods staying low
So the positive new is that we can sell your property if you want it to sell, and we can also let your property if you need to find a tenant. A word of caution the selling or rental price needs to be set at the market rate to achieve an early letting or sale. On the rental side we do expect strong rental growth this year because supply is reducing but London continues to attract International students and professional tenants, and as a result demand continues to exceed supply. Therefore we advise it is better to take a slightly lower rental at the start of a tenancy and then look to increase at renewal, rather than suffer a longer void period by holding out for a rental which will only be achieved when the market catches up.
What about some of the regulatory changes taking place, and also the changes to the service being provided at Regent?
1. The Tax changes to mortgage interest tax relief (sometimes called section 24 changes) are causing Landlords to sell and / or pay down mortgage debt so this is reducing the supply of new properties on the market to let. The Tax increases can be significant with one landlord recently looking at a £9000 GBP tax increase on a property producing a £28,800 GBP per annum rental income. Please contact us if you need a referral to an accountant to review your tax position.
2. The big change in 2019 which will be effective from 1st June 2019 is the tenant fee ban; in essence this means the landlord or the agent cannot charge any fees to any tenant who wants to take a tenancy on a property. This will affect landlords because the work to check tenants in and out of properties still has to be done, we still recommend landlords will need to take up references, undertake credit checks, and then deal with all the passport, visa and immigration checks which are required before a landlord can let a property in England.
To date the tenants at Regent have paid approximately £400 GBP plus VAT towards the work undertaken, and although we have been working on some efficiencies so we can continue the level of service required, there will be some costs to pass on to the landlord. After consulting with a number of existing clients we are therefore notifying all our Clients that with effect from 1st June 2019 we will be adding a £240 GBP (£200 GBP plus VAT) charge to landlords costs as an additional fee for referencing, and compliance checking of any new tenants at the start of a tenancy or at the time of a renewal (if new referencing and ID checks are required). If you do not want this work to be carried out please contact us and we would be happy to discuss the implications in more detail.
The good news is that in Scotland the tenant fee ban has already been implemented and higher rental levels which were expected has been the result. As you can see above rents are already increasing so we expect landlords to be no worse off in the medium term so once the market adjusts the extra rental will more than cover the costs transfer from tenants to landlords.
We do now also have other fee options available for clients, to include a new Rental Guarantee and legal expenses option, and there are a number of other updates to our terms which we are implementing in 2019 to cover new license requirements from councils in London, as well as new tenant rights which are slowly being implemented through parliament. A summary of the new terms can be viewed here. so you have the full detail.
We are also delighted to be able to announce the expansion of our Block Management service where we take over the management of common areas of blocks of flats or apartments. We have recently appointed an experienced Head of Block Management, Alex Marshall- Clarke, who joins to work with our Associate Director, Monika Glogowska, to help to grow this area of the business. We are already talking to clients where they are experiencing problems with their current block managers, so if you are also having problems and believe a change to the block management company would help you, then please do get in touch with Alex or Monika.
To finish, we remain positive about London as an international city, and also positive about the steady returns achievable in the London residential property market over the medium to long term. We believe sterling is low and market pundits are already suggesting a “bounce” once the Brexit uncertainty has been resolved. As ever we remain available to discuss your residential property questions so please get in touch if you need any help or support at firstname.lastname@example.org where your question can then be directed to the correct person within the business.