Guarantors are a concept we are more used to hearing about in the banking sector but in these poor economic times they are a way of landlords getting a bit of peace of mind and tenants that do not look terribly reliable on paper getting, somewhere to live.

Another name for what we often refer to as guarantors is a surety agreement and the idea is quite a simple one. If the prospective tenant, for whatever reason does not come across very well on paper then they can have a friend or relative agree to back them financially if they are unable to pay their rent.

In practice this means that if the tenant does not pay any sum owed the landlord in a timely fashion then the landlord can pursue the guarantor for the money.

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The rental sector has experienced a large amount of activity during these difficult market conditions.  “Discount Letting has seen a 20% increase in tenant enquiries with only a 15% increase in rental property stock offered by landlords across the UK” says Managing Director Daniel Burgess. Increasing tenant demand coupled with falling interest rates is positioning 2009 to be a good year for landlords.

But it’s not all good news, with unemployment rising and the UK in the grip of a recession many tenants are struggling with their rental commitments whilst new tenants to the rental market are finding that some rental prices are out of their reach. Daniel advises landlords to be sensible when setting rental values for their investment properties in the current climate. Setting a realistic rental valuation and looking to the longer term is essential in this potentially difficult market.

Although there are many opportunities for landlords in today’s market, landlords must look after and maintain their current portfolio if they are to push forward through this potentially difficult time.  Many landlords will be looking to reduce their costs by managing their own portfolio or changing their Letting Agent. Continue reading →

Michael White of The Guardian pointed out in a recent article that the lat week of February  saw an awful lot of record lows and bad financial news. House-building was reported at its lowest point since 1980; repossessions were running at a 12-year high and buy-to-let mortgages at a five-year low, since this free-fall began barely a day goes by without some sort of negative news.

White discusses briefly the concept that I covered in yesterday’s blog, the fact that renting on a long term basis is seen as some sort of failure here in Britain, something that does not have the same sort of connotations in other parts of Europe.

His reason for discussing this was to point out that successive governments had put a lot of money into trying to create affordable housing for people to purchase. A lot of these schemes are now in trouble.

White’s main point seems to be that in order to arrest this frightening fall there is really only one way forward. The government needs to do anything it can to get banks lending again. that is the only way forward.

Boomerang children is a term used to describe kids that had managed to get out of the family home and get a bit of independence only to find themselves having to move back in with their parents in their twenties or even thirties. Clearly the current economic situation has provided perfect conditions for this to happen and according to a recent article in the Telegraph, Britain now has twice the number of these types of arrangements than any other country in Europe.

“The increase in boomerang families began when house prices reached new highs in 2007 and saw not only grown-up children returning home but also three-generational families under one roof,” comments Jonathan Haward, MD of County Homesearch.

Many couples begin to start thinking of downsizing and even maybe heading off around Europe in a camper van once all their children have flown the nest but Haward thinks this could be a grave error. In fact, rather than cutting back on space, Haward suggests some parents might want to look at a loft conversion or something to accommodate their boomerang children.

On the other hand if you buy the camper van quickly enough your children may not be able to locate you to suggest moving back in. Just a thought.

Jones Lang Le Salle has forecast that the UK property market recovery will begin in 2011. Some domestic pundits predict it could even be earlier than that.

To be honest I don’t think anybody knows when prices will recover. We all have an opinion and this is their opinion.

Citing the effort the government is putting into making mortgages available and affordable and the increase in buyer activity these people are saying there could be as much as a 5-7% property price growth by the end of 2010.

These people seem to think that the problem in the market at the moment is a slight gap between what buyers are willing to pay and sellers are willing to accept.

They think this gap is sure to close as people who have been forced into the landlord business get sick of the demands on their time and lower their price expectations.

Also people who have waited and waited for the fall to bottom out may decide to bite the bullet and take what is on offer. If this was to happen it would spark a growth. Continue reading →

New figures have confirmed something we have been discussing on this blog for a while; there is a glut in the rental market caused by home sellers unwilling to accept the dire low prices on offer.

This clearly has a knock on effect as the glut of properties forces the rental prices lower and lower in line with the law of supply and demand.

The Findaproperty.com Rental Index reports that a surge in supply has pushed UK rental asking prices down by 1.2% over the month and 4.8% over the year.

It is interesting to note that this effect is worse in areas that rely on City workers for their rental demand. These areas experience very high rental price falls with drops of up to 11.7% which in real terms works out to £220 a month.

Places where the rent was not so high in the first place are managing to resist the trend more robustly.
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The latest figures from the National Landlords Association show that 74% of their advice line calls are about tenants not paying their rent.

This is hardly surprising in these tough times but it’s something the wider community doesn’t seem to think about. This dire situation gets nowhere near the attention of the plight of the mortgage lenders but the figures are just as frightening.

The NLA has received over 30,000 individual telephone calls in the past 12 months, an average of 2,500 a month of which 74% are from landlords seeking advice on how to deal with tenants who are no longer paying their rent. An income the landlord obviously relies on to met his/her commitments. Continue reading →

When it was announced that the newly nationalised Northern Rock would resume lending with permission to lend as much as 90% on mortgages, many assumed they would specifically target first time buyers.

Not so says Gary Hoffman, chief executive of Northern Rock in an article for the Financial Times, he said: “We hope to do some first-time buyer lending but it is not going to be targeted at first-time buyers.”

This will surprise some as having been assured that Northern Rock was going to be filling the gap left by the withdrawal of foreign lenders and stimulating the market, many thought this would revitalise the first time buyer market.

Hoffman, however, is keen to stress that the bank is likely to mainly be lending to people with a 20% deposit.

Melanie Bien, director of London-based mortgage adviser Savills Private Finance, hopes that the bank will start to offer the 90% mortgages as she thinks it will be necessary to entice first time buyers into the market.

She said: “There is a realisation certainly from the government now that to get first-time buyers back in the market you are going to have to offer something more than 75 per cent loan-to-value.

“There is obviously risk involved and that is why there is a premium to pay but there is no other way around it. If you ask first-time buyers to put down a 25 per cent deposit they are just not going to be able to do it”
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This is interesting on the back of the news last week about Northern Rocks plans to provide 90% mortgages in some cases.

According to an article in the Telegraph at the weekend homebuyers could be required to have deposits of 15% before they can get a mortgage under a tightening of rules being considered by the City regulator.

And it seems likely that deposits will not be the only thing that comes under this kind of scrutiny. The amount you can borrow per multiple of your income is also coming under review.

The telegraph reminds us that Gordon Brown recently suggested that 100% mortgages should be banned altogether.

Lord Turner seems to think that a more important question is one of income multiples. In evidence to the Treasury Select Committee, Lord Turner said: “We can certainly see a strong argument for us getting more involved in product regulation than we have in the past.”
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Landlords may be leaving fixing old boilers longer than is necessary due in part to some confusion over tax laws.

The specific law in question is the one the government has expects to encourage landlords to bring their properties up-to-date in the heating and environmental stakes. But it seems very unclear at the moment whether they are eligible to apply for the 10% tax allowance if they replace old boilers.

David Lawrenson of LettingFocus.com has been very vocal about the fact that replacing old boilers should fall into the UK’s Landlord Energy saving Allowance.

This seems very sensible to me, in fact you would have thought it was the very essence of the spirit of that law. Clearly new boilers are going to be more energy efficient and that is the whole point.
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