2018 is over and despite continuing challenges and changes within the property industry, the buy-to- let market still remained strong. Rents are continuing to rise, on average by 1.5% across the UK according to the latest rental index with a host of new btl lenders with a new range of products ranging from bridging to cashback mortgages for investors.
So, what lies ahead in 2019? More of the same?
These are some of the things to look out for in 2019.
1) BREXIT- yep, its that word that seems to be dominating our national discourse from which we cannot escape. Despite the governments historic defeat on its Brexit deal this week the UK’s plan is still to leave the European Union on the 29th March 2019, however with each passing day and with each passing defeat for the government that date is looking less and less likely. There appears to be no option including a ‘NO Deal’ Brexit that has a majority within the House of Commons and with the ‘Vote Leave’ campaign gaining momentum and new MP’s Support on a daily basis, a second referendum remains a real possibility. What does this all mean? One word…..UNCERTAINTY! This may scare some landlords out of the market or stop potential investors from investing at this stage, this leaves a gap, an area of opportunity for shrewd investors to pick up quality property investments.
2) TENANT FEE BAN- This week the tenant fee bill made its way through the House of Lords and a date has finally been announced that as of 1st June 2019, the tenant fee ban will come into effect. The ban will mean that agents and Landlords will no longer be able to charge upfront fees to tenants, but there are a few other things in the bill that need noting. Firstly, it will be mandatory for letting agents to take out Client Money Protection insurance to protect landlords and tenants should an agent go under. Secondly there will be a limit of 5 weeks rent as a deposit on tenancies that are less than £50,000 a year and new stricter rules on holding deposits. Thirdly there are new rules that will apply to all tenancies starting after 1st June. The good news for letting agents is that they can now start preparing for the change with a date and a concrete idea of what to expect.
3) LANDLORD TAX STAGE 3- In the Finance Bill of 2016 it was announced that tax relief for finance costs would be restricted to basic rate tax payers, this has been phased in over the past few years and the 3 stage of the change comes into effect in April. This will mean that 75% of finance costs will no longer be tax deductible for higher rate tax payers. Many believe this will force some landlords into leaving the market as their investments will be losing money rather than making it. In October of 2018 the National landlord’s association released figures showing that as many of a fifth of its members were thinking of leaving the market which would equate to almost 200,000 rental properties going onto the market. Again, this might be an opportunity to pick up some great investments.
4) STABLE RENTAL GROWTH- As previously stated, rents grew across the country by 1.5% on average in 2018 and that trend is set to continue. While house prices have started to fall, according to Rightmove in November house prices fell by 5% on average across the country, property values are still very high and simply unaffordable to many first-time buyers. Any drop-in house values will be suppressed by a fall in house building, the major house builders have seen their stock values fall dramatically and with house values going in the wrong direction for them, it is likely that they will ‘land bank’, sit on the land that they have and wait for conditions to improve. In terms of demand, wages remain stagnant in the UK, any growth in young people’s wages have being very minimal. So, if younger people cannot afford to buy, they will be forced into or to continue renting. Supply for rental properties will grow and as discussed, the number of rental properties available may fall with landlords exiting the market, which will result in rents continuing to be driven up. However, what I would expect is much more long-term tenancies, many tenants staying in properties longer.
5) LEGISLATION, LEGISLATION, LEGISLATION! – 2018 saw a bombardment of new legislation for investors, landlords and letting agents to deal with. In 2018 alone, there was; How to Rent Guide (change), Minimum Energy Levels Regulations, Gas Safety (Installation and Use) (Amendment) Regulations 2018, General Data Protection Regulations (GDPR), Deregulation Act 2015, Houses in Multiple Occupation and Residential Property Licensing Reforms amongst others. We have already discussed the tenant fee ban and its implications. Another major piece of legislation for landlords to deal with is the continued roll out of the widely criticised Universal credit. Unpopular with landlords due to the initial waiting period for the first payment to come through, with he latest figures showing there has been a rise of 2,800 cases of arrears since its roll out in April last year and Universal credit tenant’s arrears across the UK now standing at a staggering £1.36m. On top of these major pieces of legislation the following bills are all making there way through Parliament; Homes (Fitness for Human Habitation and Liability of Housing Standards), Mandatory Electrical Safety Checks, Banning Orders, Private Landlords (Registration) Bill.
2019 is set to be a time of uncertainty, change, but most importantly opportunity within the property industry.
Chris Allen
Branch and Investments Manager
Viva Living Property
