Each month, we take 5 minutes to ask a lettings industry expert 5 things. This month we are lucky to be talking to Real Estate Rental Agent Zain Janmohamed of John Joseph Estate Agents.
Q. Hi Zain. Thank you so much for taking the time out to give us your thoughts today, we really appreciate it. So. I’m going to start with co-living and legislation. The rise of co-living spaces is becoming a revolutionary development in the rental markets. Co-living (and working) means that residents pay for their own private living space but share communal areas, which promotes a sense of community. But I was wondering – where does this fit in with regards to the legal landscape? Has this move towards sharing space complicated the rental market?
A. Co-living has definitely been a notable development in the rental market. The highest demand for this type of living is primarily seen within ‘hub’ cities throughout the UK. Demands for rooms in London for example are now so high that room prices were estimated to have increased by 2% in just 6 months last year – which is quite significant. And yes, the shift towards communal living of course brings to light the legislation covering this niche area. The term everyone hears these days and associated with house/flat sharing is HMO – which stands for Houses in Multiple Occupation. At a high level, the regulation requires a license to be held for all multi-occupied properties where there are five or more people, forming two or more separate households. Within this, there are other measures to ensure the accommodation is suitable for tenants to reside in i.e. room sizes, certificates etc. But to answer your question – I personally don’t think there have been any complications in the rental market. The property industry is an ever-changing environment and requires that landlords and agents are agile and aware of regulatory changes. There are clear cut rules defining a HMO property, which can be found simply be googling the term ‘HMO requirements’. Too often we see agents and landlords hit with fines for lack of compliance – particularly in the HMO space.
Q. Thank you! So speaking of fines – Andrews Estates have just been prosecuted for 11 consumer protection and housing offences and ordered to pay over £24,000 for failing to secure the deposits of seven individual tenants in a government-approved scheme. I’m curious to know how commonplace this is in the industry? Obviously not your company – but are you aware of this sort of misconduct around you?
A. It’s really disappointing to see Agent’s/Landlords being fined for failing to abide with regulations. Even more disappointing, failure to protect deposits is still common within the industry. I have spoken first hand to agents who have failed to protect deposits – most commonly due to a lax and lazy attitude. It would be more understandable if this was a newer piece of regulation (given the time to roll out and manpower required). However, the TDP law was introduced over 13 years ago. I simply fail to understand how/why Agents are still not abiding to this. I feel Agent’s are simply too relaxed when it comes to compliance given the lack of Agent regulation. At its core, the regulation is designed to protect both the tenant and the landlord. Agents should ensure they are in-keeping with the law to ensure they are doing their best to look after the interests of both their Landlords and Tenants.
Q. Agreed! So from fines to investments… Simon Rowell, creative director for Bannenberg & Rowell has just bought a two-bedroom flat near Clapham Junction station in south-west London for £700,000 (just £2,000 more than its sale price in January 2017, when it was new) – which he intends to rent out for about £2,500 a month. He sees himself as one of the dying breed of private buy-to-let investors. Is he right?
A. When we at John Joseph advise out clients regarding their Property investment/strategies, we always talk about investment goals. Goals are key in any type of investment. I personally don’t see a dying breed, rather, investors looking to diversify their portfolio with the addition of more aggressive approaches such as inclusion of HMO’s or commercial investing. The key principle here is to understand what Simon’s goals are. If he is more focused on the capital appreciation whilst generating a small monthly side income – I believe he has the correct strategy. However, if he is looking for a higher/quicker income, he may need to re-evaluate his strategy, possibly looking at turning this into a HMO/flipping the property. Essentially, we still see buy-to-let investment as the most common strategy for property investment. It is by far the easiest to implement and the one most mortgage brokers are aware of. With the high prices seen in London and the surrounding area, investors may be looking at different strategies – hence why he might be associated with this ‘dying breed’. However, up North, buy-to-let investment is still very much the go-to strategy.
Q. Interesting! So Aside from this recent ‘Boris bounce’ the media seem to be constantly reporting a crashing property market and extortionate rents. I often hear estate agents especially venting their frustration about this – saying that it doesn’t really reflect what’s actually happening. What are your feelings on this?
A. Well I’d have to say I definitely agree with the latter statement – and the so called Boris bounce is a good example of this actually! I don’t believe that’s it’s a true reflection of what happening in the market. The property industry has seen major regulatory reformation in the last 2/3 years… and with Brexit in the mix – the property market in general was bound to see fairly large swings. With the introduction of the regulatory changes, a change in the political landscape and Brexit, there’s no way that the media are fully able to pin-point the exact root of the shift we are seeing. Therefore, all of these terms often get amalgamated into one pot and a generic outrageous statement is reported. What’s written in the media should be taken with a pinch of salt and the source of where these articles are coming from should carefully be looked at. Property, like anything else is cyclical. I feel the media often don’t relate take the 18-year property cycle into consideration nor do they take into account the large variance within the country. Some areas have seen capital growth and others have seen stagnation. I will agree there has been a change in the market, however, these changes aren’t solely due to a Boris Bounce, rather a response to the different changes shaping the industry and market.
Q. And what are your personal post-brexit predictions for the lettings industry?
A. There has been much speculation as to what will happen to the lettings industry post-brexit. Personally, I don’t think there will be that much change within the industry. I can see many opportunistic landlords and agents using Brexit as an excuse to increase their rental amount. I think they are using the term ‘Brexit’ to mask the many challenging regulations that have come in the last few years – such as the Tenant Fee Act. I think we may see a shake-up in tenant diversity. Landlords for example might not fully understand the regulations around the Right to Rent in a post-Brexit market and experience confusion with regards to who they are allowed to rent to. Contracts of EU nationals may not be renewed and there could be refusal to rent to EU citizens – even though they have the right to stay here as long as they apply for right to settlement. I would still predict a year of uncertainty until the market re-corrects. Until then, I think it will be very difficult to establish.
A massive thank you to Zane for taking the time out of his busy schedule to do this for us. You can further connect with Zane over at John Joseph. And of course, if you want to work with an inventory clerks who truly understand the sector, don’t hesitate to get in touch with us.