The cost of renting a home increased by 0.6 per cent during May as the returns made by investment landlords hit a four-year high, figures showed today.
The typical property in England and Wales cost £745 a month to rent in May, the highest level since December last year.
But despite the jump, rents have only risen by 1.1 per cent during the past year, compared with inflation of 1.5 per cent, as measured by the consumer prices index, according to LSL Property Services.
The group, which owns the UK’s largest lettings agent network, said it was the twelfth consecutive month in which annual rent rises had been below the rate of inflation.
In absolute terms, the cost of renting a home has risen by just £8 during the 12 months to the end of May.
David Newnes, director of estate agents Reeds Rains and Your Move, part of LSL Property Services, said: “Private renting is becoming cheaper in real terms. May’s latest sub-inflation rent rises will help over nine million tenants.
“To put that in context, this is more than a hundred times as many households as have benefited from Help to Buy in its initial stages so far.”
Landlords continued to make gross yields on a property of 5.1 per cent on average during May, unchanged from April.
But when house price growth was taken into account, along with void periods between tenants, total annual returns on a buy-to-let property soared to a four-year high of 12.2 per cent.
The figure was more than double the total return of 5.3 per cent recorded in the 12 months to May 2013.
As a result, the average landlord has seen a return of £20,133 in the past 12 months, with £8,107 coming from rent and £12,026 from capital appreciation.
Tenant arrears also improved during the month, with arrears standing at 7 per cent of all rent due, compared with 8.2 per cent a year ago.
Rents in seven out of 10 regions of England and Wales are now higher than they were a year ago.
The South West saw the fastest annual increase, with the typical monthly rent 3.9 per cent higher than it was in May last year at £657.
It was followed by the East Midlands, where rents have risen by 3.8 per cent in the past year to £575, and the North West, where they are now 2.3 per cent higher at £584.
But the annual rate at which rents in London are increasing has slowed down to 1 per cent, compared with a peak of 7.9 per cent in early 2013.
Despite this, London still remains the most expensive place to rent a home at an average of £1,124 a month.
Three regions of the country recorded rent falls during the past 12 months, with the cost of letting a home dropping by 3.6 per cent in the North East and by 2.3 per cent and 0.4 per cent in the East of England and West Midlands respectively.
If you’re recently graduated or a young couple looking for a new build home, try this new development in Manchester’s Ancoats.
Where exactly is it? Technically in the central Manchester district of Ancoats, but it is located right on its border with the city’s ultra-trendy Northern Quarter.
Monster housing estate or tiny boutique development? Neither really, there will be 166 apartments when the development completes this summer.
How much will it cost me? Prices for the private properties, which will be sold by estate agents JLL, have not yet been announced – they will be launched in September. But 40 of the homes are being sold by Reed Rains on a shared ownership basis, perfect for cash strapped first time buyers who can take on a share of between 35 to 75 per cent and move in in July. One bedroom flats are priced at between £101,000 to £107,000, while the two bedroom flats have a full market price of between £121,000 and £149,000. That means a 50 per cent share of a two bedroom flat will be £60,500.
What is so great about it? Private homes within the development’s 17 storey tower have cracking views and, unusually for a city centre development there are onsite parking spaces. Greg Davies, senior branch manager of Reed Rains City Living, points out that shared ownership buyers will be able to increase their share over time. “As their career progresses and they have a bit more money they will be able to take over 100 per cent of these flats, which are in a location they probably would not be able to afford to buy outright,” he said.
Surely its not completely perfect? The main entrance is on Great Ancoats Street which is busy and noisy. The shared ownership two bedroom flats only have one bathroom, which might be an inconvenience for sharers, and the flats don’t have balconies. And although the development is only five minutes’ walk from the Northern Quarter that still means there aren’t cafes and boutiques literally on the doorstep if buyers are particularly lazy. The area isn’t awash with green space.
Who will my neighbours be? Davies anticipates his buyers will be young singles and couples, recently graduated and in their first or second city centre job. Stephen Hogg, head of residential for JLL in Manchester, is anticipating a real mix of buyers, including older couples whose children have left home, first time buyers and professionals.
What is Ancoats itself like? Ancoats has a legacy of lots of great looking industrial buildings – many of them listed – and the area has been the focus of a lot of regeneration work in recent years, but does remain a little grubby around the edges. In the past, the area has had a reputation of being fairly rough. However, Greater Manchester Police figures show the east of Manchester division, which includes Ancoats, has a not off-putting annual crime rate of 13.35 offences per 1,000 residents. “I suppose it is 10 or 15 years behind the Northern Quarter, and it is like the Northern Quarter is now spreading into Ancoats,” said Davies. Hogg agrees that Ancoats is an area to watch. “It is an environment that is changing dramatically,” he said. Nuovo is a development which was mothballed during the recession, which means that it is now not the first major development in the area. “You have got schemes behind it built up now,” said Hogg. “It is not the beginning of Ancoats’ regeneration.”
Is it any good for kids? To be honest this is prime singleton territory. The local property stock is mostly flats, with only a handful of houses, and it is perhaps a bit noisy and crowded to make a child friendly atmosphere. There is also a better choice of schools in the suburbs.
How are the public transport links? Ten minutes’ walk to Manchester Piccadilly station (half a mile), but if you work or socialise in the city centre you won’t need trains because you are right in the thick of things.
Is it up and coming? Average prices in Ancoats stand at £145,593, up a healthy 5.49 per cent in the last year. This is better than Greater Manchester as a whole, where prices are up 4.18 per cent to an average £160,464. The amount of regeneration going on should mean the area enjoys a ripple effect as buyers priced out of the Northern Quarter start to move in.
I like the sound of Ancoats what else is on sale there?
1. The area is also a focus for lots of construction, so there is plenty of opportunity to find spanking new homes like this three bedroom flat on the market at £299,950.
2. Or this two bedroom home at £175,950.
3. There is also a goodly amount of shared ownership housing aimed at first time buyers, including a share in this two bedroom flat at a bargain £35,000.
Around 19 per cent of buyers are continuing to offer more than the asking price to secure a home, despite signs that the property market is cooling, figures showed today.
Around one in five homes sold for more than their asking price during May, according to the National Association of Estate Agents.
The group blamed the situation on the shortage of properties on the market, with the number of homes estate agents have on their books falling by 27 per cent during the past year to average just 44 per branch.
It said the low level of supply was creating intense competition for the limited number of homes for sale.
The number of people paying more than the asking price is nearly three times higher than when the NAEA first began collecting the data in September 2013.
At the same time, just 46 per cent of sellers accepted less than their asking price, the lowest figure recorded.
But in a further sign that the property market is beginning to slow down, there was a slight fall in the number of house hunters estate agents had on their books, with potential buyers falling to an average of 374 per branch, down from 392 in April.
The figures came as the Council of Mortgage Lenders said mortgage advances during May had held steady at £16.5bn.
Although the figure was 12 per cent higher than in May last year, it was seen as a further sign that the market is beginning to slow.
May is the first full month since tougher affordability criteria was introduced under the Mortgage Market Review.
CML chief economist Bob Pannell said: “Market indicators point to a slowdown in activity levels, in part associated with new mortgage rules, but it is unclear how lasting this will be.”
Despite flat lending levels, the NAEA said estate agents sold an average of 10 properties per branch during May, up from nine in April.
But soaring house prices are continuing to hurt first-time buyers, with the proportion of sales going to people buying their first home shrinking to 25 per cent, down from 28 per cent in April.
Mark Hayward, managing director of the NAEA, said: “With limited numbers of houses for sale, unfortunately it means that those who simply can’t afford to increase their original offer will often be priced out the market.”
He also warned that the MMR could create ‘mortgage prisoners’, preventing people from moving home.
just 46 per cent of sellers accepted less than their asking price, the lowest figure recorded
But he added that this could lead to a slowdown in house sales, which coupled with recent sharp rises in house prices, take some of the heat out of the market.
The Bank of England’s Monetary Policy Committee warned yesterday that interest rates were likely to rise from their record low of 0.5 per cent sooner than markets expected.
The Bank’s Financial Policy Committee is also expected to announce measures to help cool the property market later this month.
But recent data suggests the market may already be slowing, with the Royal Institution for Chartered Surveyors reported a fall in buyer demand in May, while chartered surveyor e.serv said mortgage approvals for house purchase fell to their lowest level for a year in the same month.
LSL Property Services also reported that prices fell in 12 London boroughs during April.
One in five borrowers with an interest-only mortgage does not have a credible plan to repay their loan, an industry body has warned.
The Council of Mortgage Lenders said just under 20 per cent of homeowners with interest-only loans that are due to expire by the end of 2020 did not know how they would pay back what they owed.
But the group was quick to stress that this did not mean these people were in danger of losing their homes.
Very few new interest-only mortgages are now being advanced
Sue Anderson, a spokesman at the CML, said: “This is the group of people that lenders are working with and talking to about the type of strategies available to them.
“In some cases, people will be able to switch to a part repayment mortgage, in others it may be reasonable to extend the mortgage term and have them switch to part repayment.
“Lenders will also look at whether there are other strategies that can be adopted.”
Mortgage lenders have contacted around one million borrowers with interest-only loans that are due to expire by the end of 2020.
The CML said more than 80 per cent of borrowers who had responded had a credible repayment plan in place, with some switching to repayment mortgages.
It added that there had been a 13 per cent reduction in the number of interest-only borrowers in less than a year, with numbers falling from 3.2 million people to 2.8 million.
The amount of money owed on interest-only mortgages has also fallen from £424bn to £363bn in 15 months.
Anderson said: “Very few new interest-only mortgages are now being advanced, other than in the buy-to-let sector, where interest-only borrowing predominates, while a steady stream of existing borrowers continue to pay off their mortgage at term, as expected.
“But the rate of decline has accelerated because a proportion of borrowers are taking active steps to make sure they pay off their capital, including switching from interest-only to a repayment option during the term.”
Many people with interest-only mortgages have also seen an increase in the amount of equity in their homes, which the CML said gave them more options when their existing deal expired.
Meanwhile, the Bank of England reported a slow down in mortgage approvals and completions in May.
It blamed the fall on a combination of a shortage of properties being put up for sale and the introduction of the Mortgage Market Review, under which lenders have to carry out tough new affordability checks.
In its Agents’ Summary of Business Conditions report, the Bank said it was unclear to what extent the MMR would have a longer lasting or structural impact on the mortgage market.
But it pointed out that the softening in activity had been most pronounced in parts of London, where previous increases in stamp duty and concerns about prospective housing tax rises had reduced demand for homes costing more than £2 million.
It added that house price inflation had remained modest outside of the South East.
Bank of England governor Mark Carney recently warned that interest rates may rise from their record low of 0.5 per cent sooner than markets expected.
A survey released today by financial information group Markit found that 60 per cent of households now expect the Bank to start raising interest rates within six months, up from just 30 per cent in May.
Unsurprisingly, this made people feel pessimistic about the outlook for their finances during the coming 12 months, with the group’s index falling to 48.4 in June, the lowest level for five months.
Church conversions offer developers an opportunity to create a unique home. But the process can be expensive and complex. Here, we look at five development projects that have yet to be completed against five that have already been finished.
1. Richmond Wesleyan Chapel and School Hall in Penanze is on the market for offers above £200,000
2. Originally a Methodist Chapel, this property in Ramsgate has an asking price of £150,000.
3. This £220,000 chapel is in Southampton’s rural location of Soberton.
4. This two bedroom converted chapel in Warminster is in need of updating and has a guide price of £200,000.
5. For offers of above £60,000, this chapel in Wales’ Powys comes with detailed planning permission for conversion into a two bedroom home.
Converted chapels ready to move into…
1. A beautifully converted chapel in Walton on Thames, set within an exclusive gated development and on the market for £1.2m.
2. A Gothic style chapel conversion with a host of period style features in the centre of Gayton – on the market for £310,000.
3. This £535,000 converted Victorian chapel is in a stunning rural location, overlooking Sir Edwards Lake in Newcastle Upon Tyne.
4. A £595,000 charming church conversion in Otley, commanding views across the picturesque Wharfe Valley.
5. This three bedroom chapel conversion in Llandysul is currently on the market for £315,000.