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Landlords remain confident despite tough conditions

Wednesday 15th August 2012

The majority of landlords in England and Wales continue to have great faith in their property investments, despite restricted mortgage lending and an increase in void periods and rental arrears, a new report shows.

Chesterton Humberts’ monthly residential observer shows that some interesting statistical contradictions in both the sales and lettings sectors, throwing up some thought provoking questions about the true health of the national housing market.

Latest figures reveal that the number of residential sales in England & Wales in Q2 2012 was higher than the corresponding quarter in 2011, with Q2 sales also up 4.2% on Q1 2012, despite the economy contracting every quarter so far this year and mortgage lending remaining low.

In the private rented sector, a recent survey suggests landlords are the most confident since 2007 whilst other evidence shows that average void periods rose to 3.1 weeks in Q1 and that 49% of landlords have experienced rental arrears in the last 12 months and 37% worried about arrears issues in the months ahead.

Nick Barnes, head of research at Chesterton Humberts, explains: These statistical contradictions are posing some interesting questions for housing market analysts: on the one hand we have an economy that has been locked in recession all year with consumer confidence at a low ebb and yet transaction volumes have been rising.”

“The increase in sales volumes and drop in mortgage lending in June suggests that either a large number of the sales were transacted for cash or that finance was secured from sources other than traditional mortgage providers. In the lettings sector, ARLA and the NLA between them report a rise in both void periods and rental arrears, whereas 22% of respondents to a recent Paragon survey claim they would add to their portfolios over the next 12 months.

Other key observations from the report include;

The Chesterton Humberts’ Regional Thermometer gives the South East top place above London.

New home registrations in Q2 decreased by 24% compared to Q1 2011, with private sector registrations falling by 10% over the same period confirming the housing shortage.

Average price growth slowed in London but average prices are 2.3% above their 2007 peak.

Six out of ten regions outside of London saw monthly price rises with Wales the star performer (2.5%).

The North East - which has often underperformed the rest of the country - achieved the second highest monthly house price growth of 1.7%.

Robert Bartlett, CEO, comments: “The housing market, by virtue of its size and the sheer number of commentators reporting on it, is liable to throw up a variety of – sometimes apparently conflicting – statistics. The consensus view from our front line operatives, however, is of a sales market which continues to battle against a backcloth of unfavourable conditions and even the prime London market is pausing for breath. The lettings market has also been slowing as the year has progressed but remains in fundamentally good shape. In contrast to the sales market which remains characterised by both low demand and supply, especially at the prime end, there is no shortage of tenant demand although increases in stock have resulted in slower rental growth.”

Bartlett continues: As ever, confidence remains a critical factor in these challenging times and we desperately need to see some more positive news regarding key economic indicators such as GDP growth and employment - evidence of increased mortgage lending and housebuilding would, of course, also help to stimulate the housing market.”

              

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