Newsletter September 2005

ARLA First Time Buyers Report

When it comes to the choice for first time buyers between buying or renting, affordability, flexibility and responsibility are the major issues, according to the survey published today (August 31) by the Association of Residential Letting Agents, ARLA.
Letting agents report that 60 percent of all tenants, who are also potential first time buyers, find renting is the affordable alternative to stepping on to the housing ladder. However, two other factors make for a clear second division of reasons for renting.
Nearly half of those yet to achieve home ownership also enjoy the flexibility of renting and over a third are waiting to make decisions over lifestyle and career.
These figures come from a survey of ARLA members carried out during August and supported by the ARLA Panel of Mortgage Lenders, Birmingham Midshires, GMAC Residential Funding, NatWest Mortgage Services, Paragon Mortgages and The Mortgage Business.
The likelihood that potential first time buyers will find renting to be the affordable option is highest in the North West and in the South East, outside greater London. In the North West, nine out of ten tenants were reported to be renting because it was their most affordable option. At the opposite end of the scale, ARLA letting agents in central London believe that affordability is the issue for only a little over half their tenants, 54%.
Overall, ARLA members said that in their experience nearly 40% of their tenants enjoy the flexibility of renting while well over a third are waiting to make their lifestyle and career decisions. However, only five percent of the letting agents said that tenants "simply prefer renting". Despite this, more than ten percent said that tenants enjoy not having to take responsibility for the maintenance of property.
Ten percent also said that tenants find they can afford more space or a better location by renting rather than buying.
Other reasons behind preferences for renting include 'Waiting for house prices to fall', 'Haven't enough deposit', suggesting caution over high loans to value, 'Not earning enough', 'Nervous about interest rates', and 'Unsure about the housing market'.
Commented Adrian Turner, Chief Executive of ARLA, "The option for choice in housing in the rental market is not only for choice in tenure. Affordability, flexibility and who takes responsibility are major issues catered for by the private rented sector."
The ARLA First Time Buyer Survey was carried out during the first three weeks of August.

Yorkshire tops for buy-to-let investors

Despite a seasonal slowdown in the buy-to-let market, regions such as Yorkshire and the North West continue to outperform other parts of the country.
According to the August Paragon Mortgages buy-to-let index, Yorkshire has seen rental incomes rise over the month from £9,383 in June to reach £10,495 in July.
Over 12 months, rents in Yorkshire have risen by 36.7%. Landlord property values in the region have increased by 38.6% since July 2004 to reach £143,684. Despite a large increase in property values, Yorkshire remains one of the highest yielding regions in the country, at 7.3%.
John Heron, managing director of Paragon Mortgages, commented: "A number of factors contribute to the sustained demand for rented accommodation in Yorkshire. The burgeoning student population of England’s largest county, with major universities at Sheffield, Hull, Leeds and York, among others, underpin demand for rented properties."
"Many students, after graduation, remain in the county and as ‘first jobbers’ look for shared accommodation with their friends in the major towns."
"An important demographic trend that has sustained the growth of the private rented sector over the past decade or so has been the tendency for young people to leave the family home at a fairly young age to go on to further education and not return. In addition, there has been a net influx of jobs in some parts of Yorkshire which has helped create a requirement for more rented homes."
"When looking at the private rented sector, it’s important to remember that landlords are running a business in which customer demand is key. If individuals, couples or families need homes in a particular area, landlords are likely to respond to meet that demand."
The North West has also seen a strong buy-to-let market over the last year, notwithstanding a slight decline in rents this month. Rental incomes in the region have risen by almost 30% and property values by over 34% since July 2004. Yields in the North West, at just under 7%, remain above the national average of 6.7% and on a par with the South West and East Anglia.
At the same time Greater London, consistently one of the lower yielding regions, has seen yields rise slightly to 5.8% this month as both rental incomes and property values rose. 
"Despite a cooler summer market, landlords remain cautious yet opportunistic buyers," said John Heron. "September is a busy time in the rentals market with many people starting new jobs and, of course, the new academic year starting in universities and colleges up and down the country. We’ve continued to see a reasonable flow of property investment in many parts of the country as landlords look to purchase suitable properties in advance to meet identified demand." 
In terms of total returns Yorkshire has returned to pole position, generating returns of 46%, and indeed has been top of the table for every month this year, except last month. The North West is now in second position, with total returns of 42%, followed by the North at 35%. Wales and Greater London also registered total returns above the national average.
Nationally, rental incomes increased by 2.8% this month and now stand at £10,835. This represents the largest increase in rental incomes since November 2004. Over the last twelve months landlords have seen rental incomes rise by 12.9% from £9,598 in July 2004.
Property values have also continued to increase, by 3.2% this month, taking the average price to £162,409. Over the last year property values have risen by 15.5%.
As the increases in property prices and rental incomes were similar this month, average yields remained virtually stable at 6.7%.
This month, terraced and semi-detached properties saw values increase by 8.0% and 7.7% respectively while detached properties, consistently the most expensive type of investment, saw values fall by 5.9%. Flats also experienced a slight dip in value of 0.4%.
Yields for terraced properties currently stand at 7.2%, semi-detached 6.7%, detached 6.3% and flats 5.9%. In terms of rental income detached properties continue to register the highest figure at £14,290, semi-detached £13,008, terraced £10,933 and flats £8,409.

Location matters for cost-conscious students

Most students now set off for their first year at university expecting to leave with a certain amount of debt after they have graduated. But the choices students make about which university they attend, and where they live whilst they are there, can significantly affect their finances, according to Halifax Estate Agents.
In recent years student accommodation expenses have risen by more than double the increase in student loan support available, according to student body, the National Union of Students. However, these expenses vary significantly across the country.
Inevitably London is the most expensive place, with students paying on average £79 in rent per week - £10 more than the national average of £69. In fact, accommodation in Lilian Penson Hall for University College London can cost up to £217.70 per week.
At the other end of the scale, University of Teesside has the lowest rent in the country with rooms starting from £32.90 per week.
Over the duration of a standard three-year course, based on an average 38 week rental period per annum, this could mean a difference of £7,022.40 paid out in total which would have a significant bearing on your bank balance.
Colin Kemp, Managing Director at Halifax Estate Agents, said: “Today students need to consider many more factors than which course is best for them. They also need to take into account the financial implications of choosing different universities and locations. The decisions can have far reaching consequences for their financial future and can affect their parents too.”
Once your location is decided, there are a number of options available to students looking for somewhere to live, which can also have a bearing on the health on their finances.
The NUS recommends that students stay in halls of residence as long as possible, as the rent tends to be more affordable there. But for most there comes a time when they have to vacate their student halls and search for private rentals; and for many who have never before been in the property market, this can mean hidden costs, the potential risk of dealing with unscrupulous landlords, and the possibility of paying out more than they need to or should. Therefore, students are advised to only consider accredited landlords who have agreed to abide by a set of standards relating to the management of the propertys condition.
Whoever students rent from, they should be sure there are no clauses written into the tenancy agreement that would allow them to suffer unfair penalties or obligations. For example, they should be wary of charges for repairs that are the landlords responsibility, extra charges for late payment of rent, or unfair increases in rent.
With house prices rising at a higher rate in some university towns, an increasing number of parents are now buying properties as investments, and then renting them out to their children and other students.
Also, some students minimise costs by attending universities and colleges in their home towns, continuing to live at their parents house. Of course, it is not just accommodation that will leave students out of pocket. The average expenditure predicted by the NUS for students during the 2004/2005 academic year is over £8,500 including food, travel, leisure, utility bills, rent, household goods, clothes, books, fees and insurance. This figure rises to more than £10,000 for students in London.