What’s up with Landlords? Is there ‘good-news’?

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.

In Conclusion

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 info@property-venture.com. Or connect with me here

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How can you Private Sector landlords thrive beyond 2023?

Many Landlords and investors in the Private Rented Sector have grown weary of the incessant negative press and being scapegoated for soaring rents.

Yes it is incredibly difficult to navigate the housing market as a renter. And yes there are some unscrupulous Landlords who ignore legalities and housing regulation in pursuit of profit. Some of whom usually end up as part of a TV programme. But that is not representative of the whole PRS sector.

Michael Gove talks about landlords at NRLA Conference

For more people to be able to easily find a decent home, more needs to be done to supply decent housing. The endless Merry-go-Round of criticism of those who already supply decent homes is not a solution. Landlords find it increasingly challenging to supply homes in the climate of increased taxation, increased regulation (over 400 rules and regulations), high operational and finance costs.

Landlords with higher loan to value mortgages (50%+) make up 30% of the sector. These landlords are under the most pressure by rising interest costs. If more PRS Landlords tire of the situation and are driven out of the market, the less stock there is for housing those people who are not in a position to buy their own home. The more homelessness will be experienced in the UK.

What is the State of play for landlords in the PRS?

11.6m people live in homes supplied by the Private Rented Sector, this has doubled in 20 years.

Never has the PRS been so important in supplying homes. Yet the PRS stopped growing in 2016. There have been steady disposals of rented homes since. (Zoopla)

No one else is picking up the slack, certainly not the Government and the Build-to-Rent sector only represents 2-3% of housing stock. Housing delivery is falling.

All at a time when we are reaching the limits of rental affordability – rents have increased by 10.5% in the last year (Savills) and represent the highest proportion of income for decades.

Rental demand is up 51% compared with the 5-year average, yet rental stock is down 30% vs the 5-year average (Zoopla Sep ‘23)

Is the Government finally understanding the Private Rented Sector-PRS?

Having attending a recent National and Residential Landlord Association (NRLA) conference where Michael Gove appeared – albeit via video link. The audience of 800 property people, the majority of whom were landlords, got to pose topical questions.

Ben Beadle, CE of the NRLA has done a great job of lobbying on behalf of landlords, particularly around the Renters Reform Bill which plans to abolish Section 21, the main efficient and speedy way to reclaim a home. Michael Gove is beginning to appreciate the consequences of landlord-bashing.

What were the property insights to help landlords survive and thrive?

Under labour there is unlikely to be substantial change to PRS Regulation and Legislation. Much of the work to date e.g. Renters Reform Bill has been done with Cross-Party support and as such, the outcome will be more enduring. Although Labour might push for longer fixed tenancies above what is currently proposed. Clive Betts Labour MP for Sheffield SE spoke on behalf of the DLUHC Select Committee (Department for Levelling Up Housing & Communities) on housing reforms. Although it is worth highlighting 85% of tenancies are terminated by tenants. Only 6% of landlords use section 21 and only a very small % of tenants are served a notice to terminate without good reason.

It is doubtful that Rent Controls will be introduced in spite of some Labour members calling for them. The evidence at the conference overwhelmingly showed that Rent Controls don’t work. Or in fact they exacerbate rent increases. Scotland was cited as one example. Edinburgh specifically is a place where rents have increased higher than other parts of the UK.

What 3 key things ought landlords do?

1         You still need to formulate plans to nudge up the energy-efficiency of our homes.

The push for Energy Efficiency hasn’t gone away. Even though Prime Minister Rishi Sunak has slowed the impetus until post-election. Whether the current Energy Performance Certificate (EPC) is used as a means of measure into the future remains to be seen.

2         You need to put your best foot forwards by prudently managing your rental homes, especially by ensuring rents keep up with inflation.

ONS Data show that rents do not keep up with ‘average’ 3% inflation. By not regularly reviewing rental levels you can leave yourself exposed. Then you may be obliged to increase rents dramatically in one go, to keep up and protect profitability to survive. We will soon reach an unaffordable level, as rents now represent the highest proportion of income for about two decades. So acting in a measured way on an ongoing basis is more constructive.

3          Having great processes and systems in place will help ensure longevity beyond Renters Reform. This will ensure that not only can you be implicitly confident you have taken the best measures for your tenants, but that you can explicitly show to a court you have done so too.

How are you weathering the current climate?

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 info@property-venture.com. Or connect with me here

My business Property Venture® is an award-winning, Boutique property consultancy focusing on helping time-strapped professionals and expats who don’t have the local presence, or capacity, to acquire the ‘right’ properties for them.

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