‘The times, they are a changin’’
As the staff begin to decorate the office and the streets around us start to twinkle with little fairy lights I know it is that time of year again to put down my thoughts and reflections on another year embedded in the London residential property market.
Overall I feel that we are now in a sector which is being shaped and buffeted by numerous and quite substantial forces. Some good, some less so.
Broadly, the sales market is driven by events and given the number of substantial ones this year, potential buyers were reluctant to commit until they knew the outcome of the key ones. The fact that each event seems to have led to even greater uncertainty has obviously not helped.
I mentioned last year, that the market was very stratified and this continues to be the case. At the lower levels (below £1-1.5m) things continue to tick along. Above this level it gets trickier and as well the underlying uncertainty of life at the moment, Stamp Duty is a huge impediment for many. One wonders how long these rates will be maintained by the government when this perceived treasure-trove of riches is no longer bearing fruit (as evidenced by the £9bn hole in funding from this source).
The Lettings market is generally less event driven and more a demand that ebbs and flows. It is, of course, affected by events as seismic as Brexit but given we don’t yet know what shape that is going to take, it is difficult to estimate its impact. It is my view that the rental market is struggling a bit regardless of Brexit. I feel this is due to a significant increase in supply and the fact that real wages are basically flat-lining so tenants can’t afford to pay more and given they have more choice, don’t have to.
In April we saw the introduction of the extra 3% Stamp Duty charge on investment properties. This is only levied on individuals and underlines the government’s desire to shift the buy-to-let market more into the corporate arena and encourage the growth of the build-to-let sector.
However, the residential rental market seems to shift shape regularly and it is difficult to see where it is going to go. For example, although we’re seeing a slowdown in the demand for long-let properties we look over at the short-let Airbnb market and see it booming. Although, having said that, this in itself may all be about to change again as Airbnb announced a couple of weeks ago that property owners will not be able to rent whole properties for more than 90 days per year. This will then bring more property back into the long term rental sector and drive down prices further.
Another change which has been announced in the last couple of weeks is the end of agency fees to tenants. This is a difficult one to opine on because the government announcement, although seemingly very direct and clear cut turned out to be less so on greater inspection. What in fact seems to be happening is that before any ban is brought in, a consultation process will take place with members of the lettings industry. There’s also speculation that given the complexity of Brexit negotiations, the work required to implement a fee ban won’t happen until 2018.
The issue of fees to tenants has been a bit of an open sore in our industry for many years and I am disappointed ARLA, our governing body, never gave any guidance on it or tried to create standardised levels of fees for all its members. The fact you have some (both big and small) companies charging egregious fees was always dangerous for the industry because a blanket ban may then prevent the charging for perfectly legitimate costs – inventories for example. I hope the government moves on from its grandstanding stance to working with both the lettings industry and the tenant lobbying groups to create a comprehensive solution to this issue.
On a more local level, 2016 has seen us introduce and experience quite a few changes ourselves. We acquired PJ Morgan, a local independent agency based in Shoreditch in late May which generated a lot of work for us as we had to integrate the two businesses at a very busy time of the year but the team coped well. I do regret that there was less of a measured handover and consultation with landlords than we would have liked but unfortunately this was part of the terms of the deal agreed. I realise each company has its own way of doing things but I hope the ex-PJ landlords are happy to be working with us.
We are endeavouring to harness the ever increasing number of useful apps entering the property market these days. We use one which allows tenants to report maintenance issues from their smart phones/tablets, take photos and specify the exact problem so that we can then record it, keep an audit trail and pass all the information over to the relevant tradesman. We have another which is greatly improving the quality of our inspection reports to landlords.
What we are looking to introduce in 2017 is more benefits to the tenants who rent through us. We feel that by doing this, we will build a better relationship with the tenants who, we hope, will then have a better experience of renting your flat. This in turn will hopefully mean they are more respectful of it and have a greater desire to stay there. This idea is still in its infancy but we’ll keep you abreast of these changes as they happen.
Finally, the team and I hope and wish you all have a merry, relaxing (as far as possible) and enjoyable holiday. We thank you for letting us manage your properties and we look forward to working together in 2017.
Very best wishes
Ed and the team at PG Estates