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Best investment opportunities for 2023

by Sorcha DugmorePosted on

A new year often provides an opportunity to take stock of your current investment and reflect on your ambitions for the year to come. You may be considering new investment opportunities or wondering how the housing investment landscape has changed over the last year. 

To help you start your new year with a plan, we’ve identified some investment opportunities which have a lot of potential in 2023. 

Apartments or houses?

Whilst traditionally you may have sought out larger properties or single houses, it’s time to think small and explore apartment rentals. Generally, apartments offer a lower capital entry point, higher yields and more of a hands-off, hassle-free investment. With rental prices continuing to increase, young renters will be seeking cost-efficient homes which will undoubtedly continue to increase the popularity of apartments vs houses. Being a more cost-efficient entry point, apartments are a great starter property for new investors. 

Student Accommodation 

As we’ve covered in a previous article, a handful of northern student cities seem to be leading uk rental yield increases. Including; Newcastle Upon Tyne (Avg. 9.8%),  Manchester (avg. 10.1%), Bradford (10.6%) and Nottingham (11.3%). Renting to students often bring higher yields by charging rent per person rather than by property. Student rentals in busy cities will always be in high demand, making for a fast tenant turnover with each new semester. 

Looking beyond London

Research suggests that cities in the North and Midlands are becoming the new hot-spots for property investment in the UK. With cities such as Birmingham and Manchester rapidly growing in popularity with both movers and businesses (attracting higher numbers of young professionals) these cities are prime hot-spots to invest in early 2023 before property prices peak with the rising popularity. 

Property will always provide great investment opportunities, but it’s vital to be strategic with your investments to ensure you are getting your desired yield. Always conduct thorough research before making a new investment. 

Government scheme allows tenants to buy share of their homes

by Sorcha DugmorePosted on

As part of the Right to Shared Ownership scheme, residents in social and affordable housing can now apply for the chance to buy a share in their rental home. 

The government is positioning this scheme as an alternative route to buying a home for those who would have previously found the step challenging. Lucy Frazer, Housing Minister, suggested that this scheme has been put into motion to provide tenants with the chance to live in a home of their own. 

What does this mean for tenants? 

Affordable and social housing tenants will be provided with the opportunity to own a share of their home as a leaseholder. The tenant will usually be required to pay monthly service charges on the building which will include maintenance charges. 

What does this mean?

  • Tenants will be able to buy a share of their property worth between 10 and 75 %
  • Having a share of the property provides the tenant with more control over the home they live in
  • Becoming a shared owner would require the tenant to take out a mortgage while continuing to pay rent on the remaining equity, increasing living costs for the tenant
  • The Right to Shared Ownership scheme is not available in Scotland, Wales or Northern Ireland.

Which Tenants could be eligible to use this scheme? 

Tenants can apply to buy a share of their home when:

  • It is the tenant’s main home
  • The tenant has lived in the property for at least 1 year
  • They have been a tenant of social or affordable housing for at least 3 years
  • The property is eligible for the Right to Shared Ownership scheme (Landlords will be able to confirm this)

 The UK Government plans to make the Right to Shared Ownership an option that is available to more tenants in the coming years.

What does this mean for Landlords 

  • The tenant will become a leaseholder and be liable to pay service charges for necessary maintenance on the property at the same rate as someone who owns 100% of the equity on the property
  • There is an ‘initial repair period’ whilst the scheme is implemented. Meaning that costs such as structural repairs and installations will continue to be the landlord’s responsibility for 10 years after the property was built
  • If a shared owner does not pay their rent, there are measures in place for landlords to regain full possession.

Call for evidence on the impact of short-term lets

by Sorcha DugmorePosted on

The government has released a call for evidence to evaluate the impact of short-term lets on the housing market with the view to implement more effective regulations. 

Housing supply challenges are leading to mass shifts in quality of living – with young adults unable to leave their family homes, household overcrowding, unstable living circumstances and even an increase in homelessness.

How should this crisis be addressed? 

The most powerful way to address this crisis is to build more affordable homes across the country. The UK government has stated targets for this, but are falling behind on their plans to build new properties.  

Another factor in this crisis is unused homes, with an increasing number of properties being used primarily as a holiday home or other short-term let. Short-term lets are often criticised for having a big impact on the private rental sector, contributing to a significant lack of suitable housing for locals.

How big is the problem? 

  • Research from the BBC indicated that the total number of holiday lets across the country has risen by 40% since 2018.
  • Propertymark estimated in 2020 that 46,000 properties have already been made unavailable for local people looking for a home due to private landlords changing from long-term to short lets and one in 10 landlords would consider switching to short lets, under the current regulatory framework.

The correlation between increasing short-term lets and housing supply problems in the UK is hard to ignore. There is now pressure on the Government to take action to apply stronger controls to short-term lets to ensure a better balance between housing supply and the potential economic benefits from holiday makers. 

Government plans for 2023

The UK Government has released a call for evidence to develop a registration scheme in England for tourist accommodation with the aim of collecting data on the market to better understand the impact of short-term lets. 

The  review will look to address potential solutions for the key challenges caused by increasing short-term lets – particularly localised to areas where these issues are intensified by larger numbers of holiday makers. 

It will consider the growth of the short-term letting market, benefits of short-term lets and the potential impact of new policy suggestions. Additional consideration should be given to localised effects of the policies to account for the county variation in holiday let oversaturation.

It may be difficult for the UK government to balance the need to provide long-term homes with the economic benefits of holiday rentals, particularly considering the ever-growing need to boost the UK economy and move out of the cost of living crisis. 

We hope that the call to evidence will pave the way for balanced and data-driven initiatives which can benefit both the private rental sector and short-term letting agents.

Housing supply targets

by Sorcha DugmorePosted on

The UK is facing an urgent need for new and affordable housing across the country caused by an increasing population and lack of new builds. 

Housing supply issues have a significant effect on quality of living for renters, and potential renters, across the country. Lack of suitable housing can lead to: 

  • Overcrowding in houses as people work together to save costs 
  • Unstable living circumstances caused by increasing numbers of landlords selling up, or not being able to secure long-term rentals 
  • Increase in homelessness 
  • Impaired labour mobility 

According to research by the National Housing Federation, to minimise this crisis the UK must build an estimated 340,000 per year, with 145,000 fitting into the affordable housing category.

Additionally, it comes as no surprise that the supply challenges are creating a competitive housing landscape, raising prices and making it increasingly difficult for first time buyers to enter the market.  In August 2012, the average house price in England was £180,000, since then, house prices have increased by an astonishing 76%. 

As part of the Renters Reform white paper, the UK government pledged to build 300,000 new houses per year to work towards this goal.

Housing targets scrapped

Nearly 60 conservative rebels pledged to back-up plans to ban mandatory housing targets. Rishi Sunak has responded to this by easing measures and setting them as “advisory” instead of mandatory. 

In response to the surprising shift, Michael Gove stated “there is no truly objective way of calculating how many new homes are needed in an area” but the “plan-making process for housing has to start with a number”. 

Looking back to when Rishi became Prime Minister in October, there were already doubts surrounding these housing targets. In October (2022) statements, Rishi had claimed that he “did not believe in arbitrary, top-down numbers”. Whilst committed to building more suitable homes across the country the new Prime Minister doubted the achievability and accuracy of the targets.

The conservative rebels took issue with the effects the targets might have on specific constituencies, with concerns of over-building in more rural areas. The government has claimed that they will now consult on how the new guidelines can take local density into account. 

Whilst housing targets of 300,000 new homes per year will be advisory and not mandatory, the Government has stated their commitment to plan high numbers of new builds across the country. Additionally, new measures are being put in place to better control the short-term letting market in the hopes that this can create opportunities for higher numbers of suitable residential homes. 

The best property investment opportunities for next year

by Sorcha DugmorePosted on

As 2022 draws to a close, many landlords will be casting their eyes to 2023 and the rental opportunities that lie ahead for those seeking to expand their portfolios.

Despite ongoing economic challenges, property investment remains strong across the UK with rental demand and yields increasing across the country.

However, as the economic landscape changes, London is no longer taking centre-stage as a desired location for rental properties. Rising student demands and growing industry in northern cities is presenting new and exciting opportunities for landlords which might present more cost-efficient investments.

Where are the leading property investment opportunities in 2023?

1. Birmingham

As the largest professional hub outside of London, Birmingham presents an affordable opportunity for landlords wanting to expand their portfolios elsewhere.

The city benefits from a consistently high demand of both relocating professionals and students. This means buy-to-let landlords can find some exciting choices for investment in this city.

With 40% of the population in Birmingham being under 25, we can only expect demand for rentals in this city to continue growing over the coming years.

2. Bristol

In 2022, Bristol took top spot in Aldermore Bank’s buy-to-let city tracker, which ranks the UK’s best areas for buy-to-let investments. The research takes into account average rental prices, rental yield, short-term returns, long-term returns and percentage of the city population who are in the rental market.

Its top ranking was mainly due to long-term property growth; with an annual average growth of 5.1%, along with the lowest number of long-term property vacancies (0.6%).

This thriving city in the South West presents a research-backed solid investment that will likely appeal to landlords in the south looking to expand their property portfolios.

3. (any) Student Cities

As mentioned in our previous article, demand for student accommodation across the uk is at an all time high, presenting many investment opportunities for landlords who are interested in short-term student lets.

By nature student lets provide higher yields for landlords, due to charging rent per student. With the current demand crisis for student accommodation, now might be the right time to invest.

Landlord guide to avoiding winter mould damage

by Sorcha DugmorePosted on

During the colder winter months, the risk of property damage such as mould increases. Property mould is one of the most disputed types of property damage between tenants and landlords, with both building structure and tenant lifestyle contributing to these damages.

Property mould can cause structural issues, dry rot and leaks, which can all escalate into more significant damage. Additionally, the presence of mould can have a big impact on tenant health, with mould causing colds, allergies and worsening existing health issues such as asthma.

Can mould damage be prevented?

Both structural building issues and tenant lifestyle can contribute to property mould. We’ve put together some guidance below to help landlords better communicate with tenants during winter to prevent damage to properties.

1. Don’t let the property temperature drop too much

Rising energy prices are contributing to colder properties as tenants strive to save money. But unfortunately these cut-backs can cause mould build-up, which affects both tenants and landlords. Tenants should be properly informed of the ways they can be cost-efficient in their energy usage, whilst maintaining an acceptable temperature in the property.

Some preventative actions tenants can take include having the heating on for just one hour a day, making use of off-peak energy times to reduce costs, or maintaining a consistent minimum temperature in the household which can be more cost-efficient than an off-on approach.

2. Remove mould immediately

Early-stage mould is easily wiped away. Tenants should be encouraged to keep look-out for property mould and remove the mould immediately with mould remover spray to prevent spreading.

3. Ventilate when drying clothes inside the property

When tenants use drying racks inside properties to dry their laundry, they release large amounts of moisture into the air. Inside a cold apartment, this moisture builds up on walls and surfaces and can quickly turn into mould.

Tenants should be advised to always dry their clothes in a well-ventilated space (or preferably outdoors where possible). Having the heating on whilst clothes dry will speed up the drying process and reduce the risk of damp and mould.

4. Make sure ventilation is not covered

If property vents are covered by furniture, or extraction fans are not used in damp rooms, the restricted air flow will increase the likelihood of damp.

Tenants should be encouraged to open windows in bathrooms for a short period to avoid a build up of moisture and to avoid blocking air vents.

5. Reduce condensation when cooking

Boiling pans, frying and using ovens, can all contribute to additional condensation and moisture build-up. Tenants should be advised to keep windows open whilst cooking to increase ventilation and help to regulate the temperature. Where there are no windows in the kitchen, using the extraction hood when cooking will help to reduce condensation.

6. Avoid gutter blockages

At this time of year gutters can easily get clogged with falling leaves and debris from trees as well as moss from the roof. Overflowing gutters can damage walls and create damp issues inside the property. Landlords and tenants should ensure that gutters are cleaned before the worst of the winter months to avoid blockages.

Summary

It is important not to ignore mould, condensation and damp issues within a property. They often start off small but can grow quickly and cause lasting damage when ignored.

Many modern properties are so well insulated that it is difficult to stop condensation from building up so it is important that tenants are aware of the need to ventilate the property even when it is cold outside.

Be vigilant when carrying out property inspections and act quickly when tenants report damp, condensation or mould in the property and where necessary ensure repairs are made.

Abolishing Section 21 – Could it be good news for landlords?

by Sorcha DugmorePosted on

The section 21 notice allows landlords to regain possession from assured shorthold tenancies without establishing fault on behalf of the tenant, usually referred to as a ‘no fault eviction’.

This has been criticised for affecting the wellbeing of private tenants, creating a sense of insecurity and lack of clarity. Abolishing this process and implementing more predictable systems is intended to provide more security for tenants and landlords across the country.

As part of the renters reform bill, the abolition of the section 21 ruling is part of a Government white paper which promises to create fairer standards of living for renters across the country.

What is changing?

The Renters Reform Bill sets out plans to abolish section 21 eviction notices. The abolition would supposedly put an end to ‘no fault evictions’, granting tenants more clarity in regards to the length of their tenancies.

After section 21 is abolished, landlords will need to provide a suitable reason for ending tenancies, for example, a breach of contract or selling the property.

Whilst bringing significant change to the buy-to-let market, landlords will be relieved to learn that the changes to section 21 do not affect their ability to take back properties from anti-social tenants or for necessary reasons (such as wanting to sell the property or move back in.)

In fact, this process may become easier when it is for a suitable reason. With the new changes, Court processing is intended to be reformed to be quicker. Evictions currently can take 6 to 12 months.

We can expect that this new system brings both a sense of security for tenants as well as an easier process for landlords who need to reclaim their properties for necessary reasons. However, we would advise that landlords work with a suitable managing agent such as Howsy, who can help them navigate the changes in legislation as well as the eviction process.

Are renters moving back to the city?

by Sorcha DugmorePosted on

The COVID outbreak in 2020 triggered a widespread trend as renters and homeowners across the nation chose to move away from city life in preference of larger homes surrounded by more outside space.

The move was encouraged even more by the (still growing) work from home flexibility being offered by most companies, giving employees the freedom to choose places to live that are further away from their offices.

But is this still the case?

A Rightmove report in May this year stated that they had seen a 50% increase in home movers looking to move back into Britain’s busiest cities.

So it would seem that many movers regret their decision to move further out. The main reasons for relocating  include missing family and friends, being further away from leisure and sporting amenities, feeling disconnected and craving the social life that the city brings. 

“Bills included” is an increasingly popular demand by tenants

by Sorcha DugmorePosted on

Bills included’ has become the most popular renter search term on Rightmove with an increase of +36% in search volume, overtaking pets and gardens for the first time.

And it’s not difficult to understand why.

As the cost of living sky-rockets in the UK, the average household bills increased by 54% in April of 2022 and were estimated to increase by another 80% by the end of the year.

As renters struggle with the rising costs, they are seeking ways to gain more security and clarity around their outgoings. 

Landlords must now seriously consider the value of including bills against the risk of current unpredictability in rising costs.