Time to let a home falls to record low of 20 days
Growing demand for rented property, combined with a falling supply has meant tenants must move quicker than ever to seal the deal.
The average time it takes to let a home dropped to a record low of 20 days during the first seven months of the year.
A combination of increased demand from tenants and falling supply as landlords exit the sector led to rental properties being snapped up quickly, according to Hamptons International.
While one-bedroom properties took the least time to let between 2014 and 2018, three-bedroom homes were moving quickest during the seven months to the end of July, suggesting a shift in tenant mix.
Unsurprisingly, the mismatch between supply and demand is pushing rents higher, with the cost of being a tenant rising by 1.9% in the year to July to average £982.
Why is this happening?
The rental market is currently experiencing strong demand as stretched affordability prices many people out of buying a home, while uncertainty over Brexit is causing others to put moving plans on hold.
Hamptons said it had seen a 5.6% increase in applications from potential tenants during the seven months to July.
At the same time, a combination of tax and regulatory changes have caused landlords to exit the sector and sell their properties, with Hamptons seeing a 5% fall in stock levels so far this year.
The fact that more tenants are chasing fewer properties has led to homes being let quicker.
Who does it affect?
The amount of time taken to find a tenant fell in every region of Great Britain during the first seven months of the year.
Finding tenants was quickest in the south west and East Midlands, at an average of just 18 days.
Landlords had to wait for the longest to find a tenant in the north east, but even here the process only took 24 days, and was still four days faster than it had been a year earlier.
London saw the biggest decline, with it taking just 19 days to let a property in the capital, six days quicker than during the same period of 2018, with properties in Hillingdon let within 9.5 days on average.
What’s the background?
Strong demand from tenants led to rents rising in nearly all regions of Great Britain.
Scotland saw the strongest year-on-year rise with rents increasing by 5.2%, followed by the south west at 4.7% and the south east at 4%. The Midlands was the only region to buck this trend, with rents decreasing by 2.7% in the past 12 months.
In terms of property types, the cost of renting a one-bedroom home rose by 2.8% year-on-year, compared with a 1.3% rise for three-bedroom homes.
Hamptons said this trend had contributed to more tenants looking to rent a larger property as a group, rather than a one-bedroom flat on their own.
Is the new-build premium worth it?
New-build homes are selling for a premium of £65,000, according to the Land Registry. We take a look at what is driving the price difference and ask whether it's worth paying.
New-build homes are selling for a premium of more than £65,000 compared with existing housing stock.
The average UK new home sold for £290,176, compared with a typical sales price of £224,729 for older properties, according to the latest figures from the Land Registry.
The premium buyers pay for a new build home has increased by £5,000 during the past year.
Historically, the price of new build and existing properties has been much closer, with buyers more likely to pay a premium for a home that is being resold.
Why is this happening?
A number of different factors are likely to be behind the strong price growth for new-build homes in recent years.
On the one hand, the higher price of new builds is likely to reflect the fact that housebuilding activity is currently concentrated in southern regions, particularly London, where property values are higher.
In fact, figures from the NHBC show that in the three months to the end of June 6,000 properties were built in London and 6,584 in the south east, compared with just 1,226 in the north east and 1,954 in Yorkshire and Humberside.
Some of the premium can also be accounted for by developers targeting the high-end of the market and building luxury homes in some locations.
But there are suggestions that the Government’s Help to Buy equity loan scheme is responsible for driving prices up in the new build sector, as the initiative only applies to new build properties.
Some studies claim the popularity of Help to Buy has created a mismatch between supply and demand, driving up the cost of new builds.
What advantages do new-build homes offer?
Potential buyers will have to think carefully about whether or not paying the new-build premium is worth it for them.
For first-time buyers who want to take advantage of the Help to Buy equity loan scheme the lure of a five-year interest-free loan worth up to 20% of their home’s value may well make it worthwhile.
This is particularly true if it enables them to purchase a bigger property, meaning they will need to make fewer moves up the housing ladder.
New-build homes come with other advantages too, as they are typically more energy efficient than older properties, while they require less maintenance and have a 10-year building warranty from the NHBC.
As a result of these factors, they tent to have lower running costs compared with existing housing stock.
Some new builds, particularly apartments, also come with significant amenities, such as gyms, swimming pools and even cinemas.
Finally, new developments may offer property types that are not currently plentiful among the existing housing stock, such as starter homes or detached family properties.
What are the downsides?
Unfortunately, new build properties do have some downsides as well.
While in theory no decorating should be required, in practice many homeowners have to go through the process of snagging with the developer, to sort out issues that may have been overlooked.
New build properties are also more likely to be leasehold than existing ones, which, particularly in the case of houses, tend to be freehold.
It is worth noting, however, that the Government is currently consulting on whether the majority of new-build houses should be sold as freehold.
Finally, new build properties are often smaller than their older counterparts as developers try to fit more units on to a site.
Homeowners appear to be shunning moving in favour of improving their property
High levels of equity being withdrawn by people remortgaging suggests homeowners are investing in significant improvement works.
Growing numbers of homeowners appear to be opting to extend or improve their current property instead of trading up the housing ladder.
Around 16,880 people increased the outstanding size of their loan in June when they remortgaged, borrowing an additional £56,100 each on average, according to figures from UK Finance.
While the group does not track what homeowners are using the money for, commentators speculated that it was being used for substantial home improvements.
Adrian Anderson, director of mortgage broker Anderson Harris, says: “Many borrowers are taking on extra borrowing when they come to remortgage.
“This is a clear sign that homeowners are staying put and improving or extending, rather than paying the hefty cost of moving home.”
The number of people who took on additional borrowing outstripped the 15,320 homeowners who switched loans without increasing the size of their mortgage.
The total was also 8% higher than it had been in June 2018, suggesting it represents a growing trend.
Why is this happening?
A number of factors are likely to be driving the decision among homeowners to extend rather than move.
As house prices have risen, the associated costs of moving – many of which are charged as a percentage of a property’s value, have also increased.
In its most recent survey, Lloyds Bank estimate the average person now spends more than £12,000 on taxes, surveyors’ and estate agents’ fees and moving costs when they buy a new home.
At the same time, growth in property values has increased the gap between the cost of a starter home and a family property, leading to many people finding their second step up the property ladder harder than their first.
Meanwhile, the current shortage of homes for sale, means those looking to buy a new property have only a limited choice.
As a result, it appears that many people have decided they are better off staying put and finding a way to extend their current home.
Who does it affect?
While improving their property may make sense for homeowners instead of moving, it is bad news for the housing market as a whole.
In order to function efficiently, the property market needs a steady stream of people to be trading up the ladder to free up properties for those lower down.
The current subdued level of transactions has led to a shortage of homes for sale, which has in turn deterred existing homeowners from moving, creating a vicious circle.
What’s the background?
For homeowners considering extending or improving their property, it is worth weighing up the costs of the work involved against the likely value it will add to their property.
A study carried out by Anglia Home Improvements earlier this year found that while a loft conversion typically adds an average of £24,255 to a home’s likely sale price, building an extension had far less impact at £6,456.
Those considering adding a conservatory in order to get more space, may only see the value of their property rise by £3,155.