The old-style regulated private sector tenancy is meant to be a relic of the past but it emerged today as one of the main reasons for better than expected results by Grainger.
Britain’s biggest quoted residential landlord reported a pre-tax loss of £112m in the year to 30 September compared to a profit of £77.5m in 2007. Not great news on the face of it - the slump was mainly due to a fall of 7.6 per cent in the value of its property portfolio. But that was seen on the stock market as good news because the fall was substantially less than the 12.4 per cent fall and its shares rose more than 20 per cent in early trading.
Two reasons for this are Grainger’s lack of exposure to the market in city centre apartments, the core of the buy to let boom and bust where some property values have fallen by 50 per cent, and its diversification into the conservative German market.
But a third is that it is the market leader in regulated tenancies. Most are unmodernised and of relatively low average value, which means demand has held up when they become available for sale they are affordable and ripe for refurbishment.
In addition: ‘The nature of many of our tenancies are such that we can sell them without waiting for vacancy and still realise a profit. These “investment” sales are a useful way to produce additional cashflows. As we have demonstrated through the 15 per cent increase in sales during our last financial year, we are able to sell assets even in difficult market conditions.’
The company says that 2009 will be very difficult and that cash conservation and increased asset sales will be its key strategies.
Who would have thought it? 20 years after the 1988 Housing Act brought in assured shorthold tenancies and ushered in the modern expansion of the private rented sector, regulated tenancies turn out to be good for landlords too.