By far the biggest concern for landlords today is how to continue to receive guaranteed rent from tenants. However, a recent survey of almost 4,000 landlords highlighted four further key areas that cause most worries. As we come to the end of 2017 we felt it was only appropriate to review what has been a tough year for many UK landlords.
Further Government legislation
The current Conservative government clearly has a plan for UK landlords. And the idea is to reduce their overall numbers. Over the last few years we have seen a plethora of legislation all aimed at reducing the number of properties owned by private landlords. The aim is clear – to make homes more accessible to first time buyers. In a time when there is a shortage of property the government feels that landlords hold too many properties. Whilst on the one hand this idea is admirable, there are very real concerns that we could end up with more people becoming homeless.
Rent arrears and Guaranteed Rent
With a general squeeze on incomes this has taken a toll this on some tenant’s abilities to pay rent. As many as 52% of landlords have experienced rental arrears at some point. Whilst their are Rent Guarantee insurance products in the market we have found these to be lacking in the main. Landlords talk of problems in making a valid claim and the need to pay an excess upfront. The good news is that there are alternatives to Rent Guarantee insurance. Some landlords now insist on much larger deposits that cover at between 3 – 6 months. Another alternative is to opt for a Guaranteed Rent scheme operated by specialist companies. This type of scheme will guarantee the rent on a property and in some cases will even cover minor maintenance issues. You can find out a lot more about this type of service here.
Restrictions in Buy to Let lending and mortgage interest tax relief
As a further blow to landlords, the government has now introduced a restriction on mortgage interest tax relief. This is something of a game changer for most landlords. In the past a landlord could deduct their total interest costs from rental income. From April 2017 this all changed with a steady phasing in of a 25% restriction per year over the next four years. By April 2021 landlords will no longer be able to deduct any of their interest costs. Instead there will be an annual taxable allowance which will help some landlords and at the same time make no difference to others. The stark reality is that for most landlords with a second income these changes will mean a considerable increase in income tax.
House prices
We have seen reasonably strong house price inflation since 2013. However, most predictions currently point to a slow down across many areas of the UK. The London market has certainly been fuelled by International buyers getting in on the property investment action. But London is now seeing a marked slow down. By contrast one or two regions are doing particularly well. Both the Midlands and North are currently tipped to perform the best over the coming few years.
What does this mean for landlords? For some landlords problems now exist in raising additional capital for further purchases. As house prices stagnate this means that a landlord is restricted on borrowing ever greater sums secured against their portfolio. This is a very real worry for some.
What can landlords expect in 2018 to affect guaranteed rent
Electrical Safety Inspections
We believe there will continue to be growing interest in legislating against private landlords. We fully expect that five year electrical checks will become compulsory across all rental properties. This would make sense and it has always been something of a bug bear why this has not been compulsory before.
Minimum Energy Performance standards
From April 2018 no property with an EPC rating below E will be eligible to be marketed for let. Landlords are being reminded now to take action on this and to improve the energy performance of their properties to ensure they stay on the right side of the law.
Proposed Tenant Fee ban
Perhaps the biggest news this year was the shock announcement that the government intends to ban landlords and their agents from charging tenants any fees. Whilst this might not sound much of a problem you only have to dig a little deeper to find out what this will mean for the average high street agent. To put it into context, it is anticipated that this one change alone could cost an agent as much as £6,000 per month in lost revenue. And this could be enough to force the closure of many agents. Property commentators say that some of the costs will merely be passed onto tenants in the form of increased rents. Time will tell. You can find out a great deal more about the government’s plans for the tenant fee ban here.
In summary
As ever it is not all doom and gloom. Landlords who take the time to educate themselves will always find a way to continue to make their properties work and perhaps even better than previously. And don’t forget it is still possible to enlist the help of a professional agent that could help you to achieve guaranteed rent. Perhaps the best advice we could give here is to take the time to speak to a good number of agents before deciding on one to employ.
We hope you have enjoyed reading through our review of 2017 and that you go into the New Year with a solid plan for your rental properties.