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Article > Property Prices Down, Running Costs Up – Who Wants To Be A Landlord?

Article kindly provided by Mike Clarke


Landlords are reporting a significant increase in demand for rental property as many former home owners are attempting to get off the property ladder due to the increase in costs and stresses associated with owning and running a family home.

Many former householders are seeking private rental sector (PRS) properties to escape the trials and tribulations of the current property market, as they would rather the landlord dealt with the hassles and costs. This news came at the beginning of May 2011, as tenancies & housing costs were announced as reaching a 3 year high.

According to research by Halifax the cost of owning and running a home in the UK has now reached its highest level since 2008, even though the UK has been experiencing historically low interest rates. The average annual cost associated of owning and running a residential property as a family home rose by 1.4% (£127) from £8,956 in March 2010 to £9,083 in March 2011. That is 3.5% (£328) lower than the annual total cost prior to March 2008 (£9,412).

Mortgage payments remain the largest single component of the cost of owning and running a home, accounting for 39% of total costs, however the 21% decline in mortgage payments since 2008 has resulted in the mortgage payment share of total housing costs declined from 48% in March 2008 to 39% in March 2011. Mortgage payments were the only housing expense category to see a fall between March 2008 and March 2011 and also recorded the biggest decline over the past year (-2%) driven by the substantial fall in mortgage payments for those with tracker mortgages.

The average mortgage rate paid by borrowers fell between March 2008 and March 2011 from 5.80% to 3.49%, helping to reduce the average annual mortgage payment (interest and capital repayments) by 21% (£956). When calculating housing expenditure (excluding mortgage costs) then housing related expenditure has increased by 13% between March 2008 and March 2011. That is greater than the 10% rise in inflation over the same time period.

Tenants paying rent rather than a mortgage have seen their housing costs rise by 10% over the same time period.

Property owners have really been feeling the pinch, since March 2008 with rises in 9 out of the 11 housing expenditure categories including:

  • The increase of household utility bills up 19% since 2008
  • Increase in housing maintenance costs up 17% since 2008
  • Domestic electricity and gas bills’ proportion of housing costs rose from 13% to 16% as a result of the 19% rise in costs over the past 3 years.
  • Electricity and gas charges account for the second highest associated housing cost followed by council tax charges. (These costs are the tenant’s responsibility when occupied and the homeowners/landlords responsibility when the property is vacant)

Even when the UK housing market is broken down and looked at regionally, all regions have seen a fall in housing costs since 2008 to March 2011:

  • London Down 5.9%
    (Highest average annual costs of owning and running a property 11,783)
  • South East Down 4.9%
    (2nd largest decrease) (Average costs £10,496)
  • East of England Down 4.5%
    (North East has the lowest average housing costs £7,421)
  • Northern Ireland Down 0.3%
    (The smallest drop in housing costs)

Halifax housing economist Suren Thiru, said: “Household finances remain under pressure with the significant drop in mortgage payments since 2008 mostly offset by increases in other household bills. Rising utility bills have been a clear driver behind this, along with increases in maintenance costs and council tax charges. The current strain on household finances is particularly concerning at a time when earnings growth remains weak.”

Despite having the highest absolute costs, property expenses are the lowest in London when expressed as a percentage of gross average full-time earnings (25%). Property owning and running costs are highest in relation to earnings in the East of England (31%).

So are landlords ready to capitalise on the current state of the economy?

Landlords who have surrounded themselves with like minded individuals, are active in the property networking community or members of a Landlord Association would say a resounding “YES!” as they have battled through legislation change, red tape, licensing, more regulation, housing benefit cuts and even more officialdom by working together and taking their fight to Downing Street.

Despite the increased costs of running a property it is still worth the hassle for many landlords. Providing quality accommodation for people looking for a place to call “Home” is the focus for landlords. Regulation has improved standards in areas across the country, bringing improvements in the quality of accommodation available for tenants thus creating demand and if the landlord makes a profit and invests back into their asset there can only be further gains for both happy tenants and good landlords.

Are Property Investors Capitalising On The Property Crash?

From speaking to many property investors, landlords and professionals at property networking events around the UK it seems that the answer to the above question is a resounding “NO!” But it isn’t for the want of trying.

Whilst landlords report an increased demand for property, they are struggling to increase the size of their property portfolio. The lack of available finance and sufficient cashflow appear to be key factors for many struggling landlords.

The property boom prior to 2007 and the ease of refinancing saw a rush of new investors to the market, buying up property for rental purposes, hoping for a further increase in property prices, were wiped out by the economic crash and bursting of the property bubble.

The Bail out of the UK banking system and amalgamation of some of the biggest banks on the high street still haunts the UK economy. No one bank trusts any other bank so they are even reluctant to lend to each other let alone investors. Restrictions put in place by the LloydsTSB/Halifax/Bank of Scotland (HBOS) banks have included limiting the number of mortgage products allowed to only 3 (down from the previously allowed 9).

Landlords are susceptible to feeling the pinch as the struggling economy bites harder.

Landlord insurance premiums have risen alongside increasing maintenance and repair costs and for the rising number of landlords unfortunate enough to be subject to “Bad Tenants” who have the expense of the eviction process it can spell financial disaster.

Many investors have been forced to adapt their investment strategies, some exploring the potential effectiveness of using Lease Options to control and profit from property as a way of expanding their property portfolio’s and there are those investors who have been forced to adapt their financial strategies in order to protect existing assets focusing on rental yield rather than capital appreciation, for some this has meant disaster and repossession as their finances became stretched to breaking point.

The bottom line for investors to remember is:

Property prices are still falling, meaning vendors are becoming even more motivated to sell their financial millstone and get off the property ladder. If you are able to obtain finance use it wisely! Don’t overstretch your precious finances and make generous contingency plans. As long as the rental income exceeds the cost of the mortgage, landlord insurance and maintenance of the rental property then your investment remains as “safe as houses”.

Good Luck with your investing, I hope you profit from property!

Mike Clarke


Financial Data from Halifax &


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