10:34 AM, 25th September 2019, About 3 years ago 7
The standard of accommodation in the PRS has significantly improved in the last decade as the sector has expanded and professionalised. The proportion of homes in the PRS in England deemed non-decent by the ONS has fallen for ten consecutive years, decreasing to 24.5% from 44% in 2008.
In spite of the sector growing by 45% over the period, adding 1.5m homes, the number of non-decent homes has fallen in absolute terms down by 275,000. The latest English Housing Survey shows 84% of private renters were satisfied with their current accommodation.
Landlords’ spending on refurbishment has seen the quality of accommodation in the private rented sector (PRS) drastically improve in the last decade, according to the latest report Unlocking value: The role of refurbishment in buy to let by InterBay Commercial, part of specialist lending group OneSavings Bank.
Landlords’ commitment to refurbishing to improve properties has been a key factor in this improvement. A survey of more than 700 property investors, conducted for InterBay by research house Savanta, shows 70% of landlords who recently undertook a refurbishment did so to improve the property, be it its presentation or the quality of the accommodation for tenants. Meanwhile, 45% of landlords cited increasing a property’s capital or yield as their reasons to refurbish.
InterBay’s analysis shows that landlords typically spend £12,000 per refurbishment. This varies considerably on the type of refurbishment. Typical spending per heavy refurbishment (substantial works such as conversion, extensions and often requiring planning permission) on average stood at £40,000, compared to just £7,000 on a light refurbishment (typically including modernisation or redecoration).
Many landlords take a “little and often” approach to refurbishments, seeking to ensure they maintain rental income and the quality of the property, while a minority seek more significant and costly works to add value or convert a property. Indeed, just 18% of those who had recently refurbished a property had undertaken a heavy refurbishment, and of these, nearly two-thirds undertook the works to add value to the property. Overall, 28% of landlords spent less than £5,000 on their last refurbishment, and 43% spent less than £10,000. At the other end of the scale, just 13% spent more than £100,000.
Darrell Walker, Head of Sales, InterBay Commercial said:
“It may be an easy target for political point-scoring, but the private rented sector has been a success story since the financial crisis, catering for a growing proportion of the population that either cannot or chooses not to purchase a home. As the PRS has grown, it has also professionalised. As it has done so, the standard of accommodation for tenants has improved drastically too.
“Refurbishment has been central to this improvement. It is a win-win for tenants and landlords. Tenants see better quality accommodation, while landlords improve the rent they receive and maximise the value of the property. And with interest rates still bumping along the bottom, those borrowing to support refurbishment can access historically cheap funding to enable improvement works.
“Nonetheless, continued investment in the sector is not a foregone conclusion, and it must be supported rather than undermined. Landlords have been buffeted by the headwinds of policy change since 2015, and costs have risen for investors. Should this rate of change continue, it will weigh on landlords’ decisions to spend more on their portfolios, and risks undermining a decade of progress.“
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