The number of build-to-rent properties either completed, under construction or planned has risen significantly across the UK in the past year.
Analysis by Savills, commissioned by the British Property Federation (BPF), reveals there were 117,893 build-to-rent homes recorded across all the stages of development in Q1 2018; a 30% increase on Q1 2017.
Completions, as well as build-to-rent homes under construction, have grown substantially by 45% and 47% respectively, whilst properties in the planning stage have increased by 19%.
Of all the new build-to-rent homes either completed, under construction or planned, 60,530 (51%) are in London, followed by 29,600 in the North West (25%), and 13,009 across the Midlands and Yorkshire & the Humber (11%).
Ian Fletcher, the director of real estate policy at BPF, commented: “The build-to-rent sector is evolving quickly, with significant delivery in the regions and more houses, rather than just apartments, coming forward.
“Policy is also adapting, as to date the sector has grown without a planning blueprint. This is now changing. With the draft revised National Planning Policy Framework, local authorities will now have to specifically identify how many new rental homes their respective areas need.”
Meanwhile, Housing Minister Dominc Raab said: “The 45% increase in completed build-to-rent homes is good news, but we’re restless to do more.
“Our revised National Planning Policy Framework is a crucial next step in supporting the build-to-rent sector, reforming planning rules, and helping to deliver 300,000 homes a year by the mid-2020s.”
London experiences lowest annual rental growth in over 7 years….
Official figures suggest the rental market remains subdued at the start of the year, whilst regional differences in performance persist.
In the 12 months to February 2018 rents in England increased by 1.1%, which remains unchanged on January, data from the Office for National Statistics (ONS) revealed.
This rises to 1.6% if London is excluded, where rents increased slightly by 0.1%; the lowest annual growth in the capital since September 2010.
The strongest rental growth was recorded in the East Midlands (2.5%), followed by the East of England and South West (2.1%), and the West Midlands and South East (1.7%), with above-average increases also reported in Wales (1.4%).
Kate Davies, executive director at The Intermediary Mortgage Lenders Association, believes the ONS figures demonstrate the burdens buy-to-let landlords are having to face, saying:
“Whilst [the data] may be giving tenants some temporary respite from higher rents, the flip-side is that landlords will be facing downward pressure on their cash-flows and profitability. This comes at a time when successive policy changes in the buy-to-let sector have proved detrimental.
“We therefore ask the Government to recognise the benefits that a strong private rented sector brings for the UK, and the importance of maintaining a good supply of rental properties for the periods when home ownership is not suitable or achievable for households.”
Retirement savers turn to property due to complexity of pensions and low interest rates
The majority of people believe that investing in property is the best way to fund retirement, according to a new survey from the Office for National Statistics (ONS).
49% of non-retired respondents claimed property was their preferred option for making the most of their money between July 2016 to June 2017, the latest Wealth and Assets survey reveals.
The second most popular method, employer pension schemes, was picked by just 22% of those surveyed.
With interest rates historically low, cash savings and ISAs have declined in popularity amongst the group; while personal pensions and premium bonds were favoured by less than 10% of those surveyed.
With the pensions system becoming increasingly complex, only 42% of respondents felt they had the sufficient knowledge on pensions to consider it as an option.
The survey also revealed that 23% of those not yet retired expected to downsize as a source of income in retirement, whereas 44% would use their savings or investments, further demonstrating the popularity of property as a means of funding retirement.
Mr Carney’s latest letter will be published in February, when the Bank of England will also release its quarterly Inflation Report.
Analysis, Andy Verity, economics correspondent
It may be the highest rate of inflation for nearly six years. But that tells you not so much how high it has got but how low it has been for so long.
In the past 10 years, inflation’s peak has been 5.2% (in 2011). Tell anyone over the age of 50 that inflation at 3.1% is out of control and you’re likely to get a scoff, followed by memories of the 70s and 80s.
What they may forget, though, is that for most of that time wages were also rising – and faster than prices. The tendency of wages to respond to higher prices and outpace them seemed to follow an iron logic back then.
Bigger price rises led to bigger pay rises, forcing many employers to charge higher prices to cover higher labour costs: the so-called “wage-price spiral”.
But those rules don’t seem to apply these days. The breakdown of that logic is why we have a squeeze on living standards. It is also why the Bank of England isn’t that worried about above-target inflation getting higher or even staying above target. In the City, a second rise in interest rates isn’t expected until August next year.
Lucy O’Carroll, chief economist at Aberdeen Standard Investments, said: “It’s quite possible that inflation is now close to its peak. But some of the latest surveys suggest that service sector costs and prices are rising. Given how dominant services are in the economy, this could feed through to inflation overall.
“That means that further interest rate rises are definitely not off the table.”
The ONS said that although airfares fell in November – down 10.4% – the decline was not as steep as last year when they tumbled 13.4%.
Data also shows that food inflation has picked up, especially prices for fish, oil and fats, such as butter and chocolate.
Figures from market researcher Kantar Worldpanel released on Tuesday indicated that food inflation hit 3.6% in the three months to 3 December, the highest rate since 2013.
It also noted that prices for butter and fish had grown as well an increase in the cost of fresh pork. Kantar said only a few items were cheaper during the period, such as fresh chicken and crisps.
Richard Lim, chief executive at Retail Economics, said that the rise in inflation had come “at precisely the wrong time for retailers”.
“In the run-up to Christmas, the cost of living, now rising at the fastest rate in five years, remains uncomfortably high for households.”
He said that food inflation “is one of the most transparent indicators of living costs and often the catalyst to cut back on spending elsewhere”.
However, he expects the inflation rate to now fall and could reach 2.5% by Easter.
The ONS will announce employment data for the August to October period on Wednesday, which will include figures for wage growth.
Ben Brettell, senior economist at Hargreaves Lansdown, forecasts that average weekly wages have risen by 2.5% during the period.
He said: “With wage growth picking up we should see an end to falling real pay in due course.
“That’ll be of small comfort, however, to households facing a significant increase in the cost of Christmas this year.”
In his budget speech this week, the Chancellor pledged 2 billion for the Home Building Fund to be targeted specifically at small and medium sized builders (SME) – allowing them to play a greater role in tackling the UK’s critical housing shortage.
Welcoming the announcement, Chief executive Brian Berry from the Federation of Master Builders (FMB) said that the government’s new goal of building 300,000 homes pa by mid-2020s, together with the 50 billion pledged in the budget to meet this target, will boost the sector.
Furthermore, a 700 million fund has also been promised to increase opportunities for small scale developments, by requiring councils to deliver more homes from smaller sites, which are faster to build.
Further commenting on the proposals, Mr Berry said that with Brexit on the horizon, one of the major challenges to building more will be a shortage of skills, as European workers make up a significant proportion of the sector’s workforce.
Ensuring that the UK’s building industry continues to have access to a skilled labour pool remains therefore a concern for many in the sector.
Liz Jenkins, partner at international services firm Clyde & Co, said:
‘Meeting the Chancellor’s ambitious targets will require an available and skilled construction workforce.’
‘In the long term we need to be attracting the next generation of talent into the sector but we have an immediate priority to create the skills we need to deliver new homes today,’ she added.
UK annual inflation in September up 0.6% compared with August, while London prices decline…
The ‘north-south divide’ seems to be diminishing, as London’s house price growth continues to lag behind the rest of the country.
The north west of England continues to dominate, with a 7.3% rise year-on-year according to the September house price index by the Office for National Statistics (ONS).
By comparison, the capital saw growth drop by 0.2% since August to just 2.5% year-on-year.
As a whole, the UK experienced an annual price increase of 5.4%, up from 4.8% in August.
This is a much faster rate than what has been reported in other recent house price indices; 2.5% according to Nationwide, and just 1.4% announced by Rightmove.
Buy-to-let investors are turning away from the capital and Jonathan Hopper, manging director of Garrington Property Finders, believes economic growth in the north and higher yields are a possible cause.
“In the 12 months to September, prices in the capital rose at barely a third of the pace of those in the fastest-growing region.
“This shift is being driven by a steady flight of equity from London – and other previously overheated regions – to areas with greater affordability.”
Cash purchases made by landlords accounted for 65% of all buy-to-let investments in the last 12 months…
Landlords choosing to buy their rental properties with cash are now dominating the UK’s rental market, according to the latest lettings index from the UK’s largest estate agency group, Countrywide.
In the last 12 months, a total of billion was invested by landlords paying for properties in cash, marking a 32% increase over the last decade.
Indicating a shift in attitude in the market, 65% of all buy-to-let property purchases were made with cash in 2017, surpassing the previous peak of 60% in 2011, as well as the 40% share seen in 2007, when the agency started their records.
A driving factor behind the increase in cash purchases is, according to Countrywide, rising house prices, which are allowing investors to remortgage their current assets and invest the equity in new properties.
However, there are regional disparities. The North East contained the largest proportion of cash buyers, which accounted for 78% of all purchases made in the region in the last 12 months, while 58% of landlords in London were still using buy-to-let mortgages to purchase their investments.
In terms of rental growth, the agency reported a 1.2% increase over the last 12 months in Great Britain, when excluding London.
The growth was mainly driven by Wales and the Midlands, where rents saw an upswing of 2.6% and 2.2% year-on-year, while average rents in the capital fell once more.
Commenting on the report, the Research Director at Countrywide, Johnny Morris, said:
‘Landlords have increased their housing wealth considerably over the last 10 years. This means cash purchases are steadily becoming a bigger part of the market…. Rising prices have allowed landlords to take equity out of both their personal or other rental homes to expand their portfolios.’