By Debbie Pennell, Regional Head of Residential Lettings & Property Management
The private rented sector (PRS) is finding its way through chaos and shock-waves resulting from the Covid-19 pandemic. Now that lockdown is lifting, there are winners and losers.
Losers include many tenants and owners who have accrued rental arrears, mortgage holidays and other debts; possible future unemployment; the cessation of furlough and, conceivably, reduced hours and income. All of these threaten stability – especially where housing is concerned.
Some landlords may also find themselves on the losing team and be forced to sell not only because of tenant rent arrears, but also due to new tax laws and regulations pertaining to rented property, which came in to effect mid-lockdown, in April.
On the other hand, some of the winners are landlords who’ve taken advantage of more rental properties coming on to the market. They have been able to snap-up more affordable, ready to let options in high-demand rental areas.
In addition, buy-to-let landlords will now benefit from the stamp duty holiday announced by the Chancellor raising the threshold payable to £500,000 until March 31st 2021. They still have to shoulder an additional 3% surcharge, applied to all second home owners, but depending on purchase price, there can still be some welcome savings. Regional property price difference will obviously apply, with those in more expensive areas benefitting most.
At a time when stocks and shares have been volatile – the FTSE 100 was down -17.86% over the past 6 months (21st Jan to 21st July) – rental property could be viewed as a safer long-term investment. But an eye to the long-term is important where the PRS is concerned.
Since the 2008 recession the PRS market has changed profile with more over 50s joining the traditional younger generation in choosing to rent.
According to the Office of National Statistics: The number of households in the private rented sector in the UK increased from 2.8 million in 2007 to 4.5 million in 2017, an increase of 1.7 million (63%) households.
The Royal Institution of Chartered Surveyors (RICS), of which Caxtons is a member, sees the government intervention on stamp duty as ‘a vital short-term measure’ and while its latest residential property market survey confirms there is recovery in activity, it caveats it by saying that longer-term expectations remain cautious.
In the lettings market, tenant demand returned to growth for the first time in three reports (non-seasonally adjusted monthly series), with a net balance of +24% of contributors seeing an increase. Meanwhile, having fallen significantly in recent months, landlord instructions were broadly steady at the headline level in June. On the back of this, rent expectations turned modestly positive, both in the near term and for the coming twelve months. As such, survey participants are now pencilling in around 1% rental growth nationally over the year ahead. Source: RICS Market Survey Report June 2020 (published 9th July 2020).
At Caxtons we have noticed an increase in enquiries from new landlords transferring their portfolios across to us for management, as well as existing landlord clients who are looking for advice on expanding their portfolio.
We have also seen London landlords buying property in and around the county, possibly following anecdotal evidence of a desire for people to get out of cities and live with more accessible green space around them.
Our Residential Lettings & Property Management team is busy, right across the county, but we are always happy to
Caxtons is a member of the Royal Institution of Chartered Surveyors (RICS), ARLAPropertymark (the Association of Residential Letting Agents); the Association of Residential Managing Agents ( ARLA), the National Approved Letting Scheme (NALS), the Tenancy Deposit Scheme (TDS), the UK Landlord Accreditation Partnership, the London Landlord Accreditation Scheme and is regulated by the Financial Conduct Authority (FCA).
Implications for Clients with Business Interruption Insurance
Caxtons is an appointed representative of Morrison Insurance Services Limited, which is authorised and regulated by the Financial Conduct Authority. Recently, Ian Millard, MD of Morrison Insurance Solutions wrote the following article on an FCA case about Covid-19 insurance cover, which is currently going through the courts.
There has been much confusion over the COVID-19 crisis and the response from insurers. In an attempt to gain greater clarity over policy cover the FCA have started a High Court action against a number of insurers. We have had a number of queries regarding the Test Case and what it means for commercial policyholders; we hope this note will help you to understand the process and how it might affect you.
The aim of the Test Case is to bridge the current wide gap in how certain policy terms and clauses are interpreted. By acting quickly with its own test case the FCA hopes to speed up the process rather than to wait for various individual and class action cases to be heard,
Christopher Woolard, Interim Chief Executive at the FCA said: ‘The court action we are taking is aimed at providing clarity and certainty for everyone involved in these BI disputes, policyholder and insurer alike. We feel it is also the quickest route to this clarity and by covering multiple policies and insurers, it will also be of most use across the market.’
The proceedings are focussed on potential cover for business interruption (BI) losses. Traditionally, BI policies cover loss of revenue or profit following damage, such as a storm or fire. Some policies also provide additional
cover for so-called ‘non-physical damage’ such as closure of premises, denial of access or cover for certain diseases. It is these extensions that have proved controversial and are now being tested in the High Court.
The FCA have selected a sample of policies to represent the majority of disputes. If the outcome is that policies should pay out the FCA will expect all insurers – even those outside the Court Case – to react accordingly.
The FCA Requirement for Claimants and Complainants:
Many policyholders have submitted claims, some of which may have been concluded. Others have formally complained when their claim has been declined. The FCA have instructed insurers to contact those customers who might be affected to draw their attention to the Test Case and the potential outcome.
We are starting to see these communications and are getting in touch with clients to discuss what it means, although it is possible that some insurers may send them direct without copying us in.
Customers who have not submitted a claim or made a formal complaint to Insurers:
We appreciate that some clients may not have submitted a Business Interruption claim for COVID-19 related losses. Others may have only made enquiries about whether they have cover. In such cases, even if your policy wording is in the scope of the FCA Court Case, Insurers will not be communicating with you as they have nothing to formally respond to.
The hearing is scheduled to start on 20th July and is likely to last between 3 and 8 days. The judges will then retire to consider their verdict and they should then indicate when their judgement should be delivered.
The FCA action could be positive for many policyholders and we hope this note explains the process. We are committed to helping our clients during these difficult times so please also visit the COVID-19 FAQs section of our web site for further information.
Caxtons, one of the leading firms of chartered surveyors in the south east is again major sponsor and contributor of the Kent Property Market Report (KPMR), which is a joint enterprise with Kent County Council and Locate in Kent.
The 2020 edition, to be launched in November, is the 29th Kent Property Market Report and will, as in previous years, tap into the combined property expertise of our team who work closely with industry partners, developers and investors. We will deliver a detailed and credible source of property analysis, information and updates across all property sectors in Kent and Medway.
The Report will also consider the future prospects for the industry with the inclusion of Caxtons’ property outlook for 2020 / 2021.
The Report examines performance of the county’s business parks, offices, industrial, retail and housing sectors. It provides a summary of infrastructure and regeneration projects at a district-level and the county’s strategic developments and game-changer projects.
The last edition was prepared against a backdrop of uncertainty because of Brexit and its outcomes. The analysis for this year’s Report will be even more challenging, due to the effects of Covid-19, lockdown and the continued prospect of a no-deal Brexit.
Agents have been asked to share information about their property deals, and developers, architects, planners and associates have been asked to provide quality images of their projects, a feature of the annual Report*.
The unveiling of this year’s Kent Property Market Report is planned for early on Wednesday 4th November. The launch will bring together the county’s property experts, investors and public sector to receive not only a first edition of the Report, but - hopefully - a full-English breakfast, although if not possible, it will be presented at an interactive virtual conference.
The 2019 report can be downloaded here