The rise and rise of the private rented sector

Posted by Stuart Prior

As experts in the UK property market, it’s our job to keep an eye on housing trends and to watch as the tides change in the rented sector. The popularity of rented housing has seen its fair share of peaks and ebbs over the years, though at this point in 2014 it seems to be going from strength to strength.

The UK faces a growing housing shortage resulting from our steadily rising population and an increase in immigration, especially from within the EU, in the past decade. This housing shortage is putting pressure on house prices across the country, particularly in urban areas and cities. While homeowners may be jumping for joy, many younger people are beginning to find themselves priced out of the housing market by this bubble. For these people, or ‘rentysomethings’ as they’re being called in the media, affordable rented property is nothing to be sniffed at.

Renting boasts a number of advantages over buying, and it’s these unique benefits that our generation of rentysomethings value. Renting is, above all, far more flexible than owning. Owning a house comes with added financial responsibilities in order to maintain the property, and buying a house or a flat is essentially making a commitment to live in the same place for, generally, the next five to ten years. Renting, on the other hand, comes with no such baggage.

Rented property is no longer being seen as simply a ‘stop gap’ by younger generations; renters are increasingly looking to rent properties that they can really love and enjoy. We’ve certainly seen a growing demand for high-quality rental units in the past few years as people seek to find a home to call their own, even if it is not, exactly, their own. Rentals boasting added services, such as a 24/7 concierge, parcel collection and included broadband are rising in popularity, and are no doubt helping to disprove the myth that all rented property is cheap or shabby.

Our rentysomethings are by now well aware of the fact that they may indeed spend the majority of their twenties and thirties in rented accommodation – so why slum it? Living in a shoebox is fine for a few years, but now that renting is most young people’s reality for a decade or more, it becomes important to make roots in rented properties, too. This has given rise to longer term tenancy agreements, which were once highly uncommon. While a longer term tenant may lose a little of the flexibility gained from renting, the added security is usually worth it for those who have no plans to move.

The UK housing market has changed considerably in the past few decades, and no doubt will in the next few. Perhaps the biggest changes we’ve seen have been in the private rented sector, where the perspective has changed entirely. No longer are rented properties seen as a ‘last resort’ option; on the contrary, there is perhaps nothing the average rentysomething desires more than a flexible, affordable tenancy agreement on a luxury rented property in an area that they would otherwise find themselves completely priced out of.


CMA Study

Posted by Stuart Prior

CMA adopts study into property management service providers

Later in 2014, the Competition and Markets Authority (CMA) will publish the results of the study it is currently conducting into the residential property management industry in England and Wales. The study was initiated in March 2014 by the Office of Fair Trading (OFT), but the work is now being continued and completed by the CMA, who have since assumed some of the responsibilities previously under OFT ownership.

Notable exclusions from the study are property management services in Scotland and Northern Ireland, and services for commercial properties. Services provided by letting agents will not be examined under this study. Originally local authorities and housing associations were beyond the scope of the study, but they have now been added to the remit.

Reasons for the study

The key purpose of the study is to assess the adequacy of services currently provided by property management companies, and whether they are offering value for money. There will be particular focus on the following areas:

• Whether cost effectiveness is a priority for property management companies as well as for leaseholders

• Leaseholder involvement in decision making

• Whether there is a need for more competition within the industry

• How subcontracted work is awarded and whether this is done without bias

• The effectiveness of leaseholders managing properties for themselves where this occurs

Companies managing retirement properties will come under particularly close scrutiny because this is an area where many concerns have been voiced. Any evidence of a two tier service, with an inferior service offered to more vulnerable customer such as the elderly, will be heavily criticised.

Possible outcomes

The findings of the report won’t be known until it is published later in the year, but it is possible that recommendations could include:

• Increased transparency for the customer on how service charges are set

• Greater leaseholder involvement in decision making,

• Competitive tendering requirements tightened for subcontracted services

• Tighter controls over vertical integration and consolidation within the property management industry

• A requirement for improved training and qualifications for property management

What could this mean for residential property management companies? Of course, it all depends on the results of the study, but it could well mean more paperwork and more meetings, for instance if the report includes recommendations to give leaseholders greater involvement. There may be quicker escalation of issues externally if tighter regulation and more scope for redress are introduced. There could be more restrictions around mergers and partnerships within the industry to promote greater competition and customer choice.

On a positive note, it could have its benefits. For example, the industry as a whole may be forced to become more professional, which could eliminate the “cowboy” companies whose poor service can damage the reputation of all property management companies. Leaseholders complain that service charges are high, but increased transparency around costs would help them to understand that good quality services cannot be provided cheaply.

It is also conceivable that there will be little change arising from the CMA study. When a similar review was conducted by the OFT in 2009, the recommendation was for self-regulation by the industry, despite the fact that the conclusion from the study was that the industry was “not working well for consumers”.

For now it is just a matter of waiting for the study to be completed and for its conclusions and recommendations to be published. Ultimately there should be no real cause for concern for property management companies who are already providing a good quality cost effective service to their customers.


Modern Buildings – Do They Have A Long Shelf Life?

Posted by Stuart Prior

Today’s modern buildings often have a complex and multipurpose structure, taking into account such compound factors as variegated mechanical and engineering systems, which cover such things as security, parking, heating, cooling, lighting, etc.  This often leads to buildings being developed with extremely complicated CHP plants, comfort cooling systems, smoke and waste extraction systems, lifts, etc. These things don’t come cheap, and if any fail then of course, there is a high cost of replacement involved.

Therefore, it is very important to have a properly thought out and laid out long-term capital expenditure plan and of course, a proper asset management plan too. When putting together the plans an effective block manager will take into account such things as the life-cycle replacement and continuous maintenance of the mechanical and engineering systems, and ensure the continuance compliance of such systems too.  A competent capital expenditure management plan will consist of a review of the developments needs and the long-term business requirements of the development owner. Mainstay Residential believe in reviewing the fixed asset needs of a development on a regular basis to ensure the development has adequate resources to thrive and stay ahead of rival developments.

Asset management is, of course, very important too.  This covers such specifics as activities and resources, responsibilities and timescales for implementing the long-term approach to the management of the development’s assets in order to achieve the agreed level of service.  This can be difficult to develop within today’s leasing environment, which tends to operate on a one-year basis. The knowledge needed to put together such plans, including such skills as pricing for the life-cycle replacement, and pricing for the continuous maintenance and compliance of such complicated plants.

Further complications are also added to the plans, when you think about the fact that developers of modern buildings tend to be involved in the scheme longer than they think, due to the fact that schemes these days are taking so much longer to sell.  This can mean that in a lot of cases, developers are now effectively becoming landlords too – with the associated complex responsibilities associated with that.

All these matters can be effectively dealt with by effective block management which will ensure that not only is a long-term planning solution and effective maintenance solution put in place to ensure a best value approach, but will also offer a USP to developers who are attempting to cope with the multiple skills required to manage a building properly.  This will enable an effective strategy to be built on to ensure that the building is effectively managed – a selling point which will attract potential purchasers.



Mixed Use Management

Posted by Stuart Prior

The rise in popularity in recent years of mixed used developments, with their complex legal and corporate structures paired with the complex building construction used; including various mechanical and engineering systems (such as security, parking, heating, lighting, etc.) – means that a wide range of skills are required in order to manage them effectively.  Many mixed use schemes tend to require property management solutions which are driven by regulations and the desire for reduced energy usage, as well as trying to offer a point of differentiation to other developments in the same marketplace, in order to attract buyers.

Having a development with a variety of tenure types would also strongly indicate that the management of that development needs to take into account the differing requirements and needs of each of the group’s resident within the development.  Residential owners will have different needs and desires than commercial tenants, and both tenant types have their own statutory regulations, which need to be followed and adhered too.

Some developments have tackled the complex issues thrown up by mixed usage by separating the management functions completely, but the Mainstay Group have found that the best value option would be to continue with a single management solution.   If there are multiple agents managing one development, the tendency can be for disputes over who is responsible for what to emerge – an annoyance which will be done away with, with the use of a single management solution.

Another issue for developers to be aware of is the length of time that a mixed use development may take to sell.  Developers are all too often now becoming landlords  – and this brings new and complex responsibilities too.  Understanding the complex issues brought about by having both residential and commercial tenants – including relevant legislation, is a very important skill for a successful building manager to hold, especially in the light of the importance of total transparency in all aspects of management which is so important to a lot of today’s tenants.

Mainstay Residential know that in order for any development to be a success it is very important to get the long-term management strategy to be right.  It is vitally important then, that a clear plan is agreed on as early in the development as possible – ideally before the first brick is even laid.  These plans must take into account the understanding that the period of ownership of a mixed use building is likely to get longer for the residential part, whilst commercial leases will get shorter.  So, a five-year or ten-year plan which presents the evidence of value for money, is a great way to show how well the building is managed, and, therefore, leave you in a better position to find buyers for any empty units within the building.