I get asked if it is a good time to invest in UK property right now? Or whether the onslaught against Landlords is worth the effort to get involved?
So here’s my perspective.
Landlords let’s look at the fundamentals of supply and demand
Roughly one fifth of households – 4.6 million houses – are in the Private Rented Sector. The Social Housing Sector caters for slightly less people at 4 million households. This figure includes Housing Associations and Local Authority housing. (English Housing Survey 2022-23).
An additional 1m rental homes are needed in the UK by 2031 to meet the growing demand according to Savills. This breaks down into 166,667 of rental homes each year.
Yet the country fails to build the annual target of 300k homes, of all tenure types, rental as well as for sale. There could be a possibility of turbo-charging supply of these rental homes, if the government could pull the levers of a mass supply in a short space of time. But the majority of current rentals are in the Private Rented Sector (PRS). The nature of the PRS is quite fragmented with lots of individual landlords who usually own less than 4 rental properties.
The bigger portfolio Landlords are in the Build-to-Rent sector, where homes are designed and built specifically for rental purposes. This sector accounts for 92,140 homes across the UK. This sector only makes up 2% of all rental properties.
There are still more Landlords selling than buying as the graph shows. The landlord exodus is likely to be for many reasons, including the Regulatory and Tax burden. In addition many PRS Landlords are more mature and likely to be exiting as part of retirement plans too.
Where are rental rates heading for landlords?
This demand: supply imbalance has pushed up rental prices. Strong demand and restricted supply has resulted in rents increasing 9.7 percent on average to £1,201 per month as the average national rent in 2023 (Zoopla).
Right Move estimates 41% more tenants are looking to move than in 2019, yet the supply of homes to rent has fallen by 35%.
Rents are likely to keep increasing, given supply is not catching up quickly enough and inflation is still present. However as inflation and Bank Base rates stabilise and fall, this will keep rental increase more in check. There is a rental threshold which becomes unaffordable for many potential renters. At which point they may seek alternative ways of living, with as a house share – HMO or moving to a completely different area.
Indeed Rightmove’s Rental Trends Tracker for Q4 2023 shows tenants are reaching an affordability ceiling. Nearly a quarter of properties needed a reduction in the asking rent. This is similar to a trend seen with Spareroom. Rent increases are now slowing down.
Is it worth you becoming a Landlord with all the landlord-bashing?
Is the current taxation burden since 2017, increasing regulation and negative messaging by politicians, pressure groups and the media putting you off?
My question to you is, what are your strengths and what do you enjoy doing?
Does becoming a good, compliant, landlord and providing a decent home for others align with your values and give a sense of pride?
If so you are likely to be doing the right thing for you and your customers.
At some stage the ill-informed politicians will realise that landlords in the Private Rented Sector are needed in order to prevent further homelessness.
The Build-to-Rent sector (bigger Corporates like L&G) was once seen as a threat by some PRS Landlords but this sector creates rental homes in bigger blocks. These are not necessarily always in central urban locations where people might want to live. Smaller PRS Landlords offer a different type home, often character properties, in different types of locations.
There is pending legislation – the Renters Reform Bill – which will restrict Landlords further in the way they deal with tenants. But for me that means I continue to be stringent in my tenant vetting process up front, as I have always done.
Given the market conditions, with a more positive outlook for inflation and interest rates along with the imbalance of supply and demand, the prospects for Landlords are positive. The representative body, the National Residential Landlords Association (NRLA) is currently playing a positive role communicating the importance of the sector to government
My business Property Venture® is an award-winning, Boutique property consultancy focusing on helping time-strapped professionals and expats invest in property, so you can carry on your day job while building your wealth. I am a landlord, ‘prudent’ property investor and developer. I help others to invest ‘prudently’ either with a bespoke Property Finding service or in a supportive mentoring capacity. If you’d like help or to find out more do message me email@example.com. Or connect with me hereTags: Buy to let, investment property, Landlord, landlords, rental