As the year draws to an end it is time to start planning for the next one. So, here is our forecast for what’s in store for Landlords in 2018.
We believe that many of the changes set to be introduced to buy-to-let in 2018 will be hugely beneficial in the long term and that 2018 has the potential to be a great year for landlords.
Despite previous years being marked by declarations that “the death of buy-to-let” was upon the industry, landlords have continued to enjoy healthy rental yields while performing what is an essential service to millions of tenants across the UK.
Whilst longer tenancies aren’t exactly new, the fact that 12 months tenancies will now be standard should be welcomed all round. We truly believe that from the landlord’s perspective, it’s better to have the security of knowing your property is let, albeit without a regular % increase in the rent, than it is to enjoy 5% income rises but with the risk of costly void periods. It’s all about looking at the bigger picture and in this instance, your profit and loss account.
Changes to Tenant Referencing
Both houses of parliament recently held debates about how tenants can be helped to improve their credit scores by requiring credit referencing agencies to add tenant’s rent payments to their credit histories and, therefore, help improve their chances of accessing affordable finance.
The government is to spend £2 million to help make this a reality. We believe that changes to the tenant referencing will help landlords let to reliable rent payers, irrespective of their overall financial circumstances.
The government is keen to see more high-quality rental properties come on to the market to offer more choice to ‘generation rent’. One outcome of this policy is that ‘build to rent’ developments, which are apartment blocks built with the backing of institutional investors and then rented out all for the same price and rental terms and conditions, are growing in number. According to the British Property Federation, there are nearly 100,000 built or with planning permission, with more than half of them in London. The government wants to see even more built, partly because they can be constructed quickly and require no government cash.
London is truly becoming a 24 hour city, with wider choice of areas being served by the 24-hour tube service, thus adding further value to the capital’s vibrancy.
The roll-out of London’s Night Tube continues, broadening the appeal of more areas of the capital to prospective tenants who require easy transport links to work or study in the day time whilst are keen to enjoy its vibrant nightlife.
The Circle and Hammersmith and City lines are set to be next on the list to get the Night Tube in the future, opening up large swathes of east and west London to 24-hour living, and better connecting the City to key parts of the West End.
This should give tenants a greater choice of rental properties across a wider range of attractive locations, helping them enjoy the best of all that the capital has to offer.
The Night Tube really is transforming London, making more and more areas easily accessible any time of the day or night, and along with other major infrastructure projects like Crossrail and Cycle Superhighways, such ‘always-on’ transport links are adding to the capital’s already strong pull. This is particularly true for young professionals and students from around the UK and abroad who come and to live and work here.
All of these developments and improvements mean further good news for prospective buyers and renters, including young families and professionals alike, as transport times fall.
It is clear that buyers and renters should consider upcoming infrastructure plans in any area that they are thinking of moving to.
Existing links and planned developments will have an impact on buyers and renters immediately, for things like commutes and school runs, as well as leisure. Forthcoming improvements will help boost the price of your property in the long run, and help not only first-time buyers but also other individuals looking to transact and climb up the property ladder.
To stay on top of things, especially when it comes to your rented property, it is vital to think ahead. So, we have come up with a few tips to help you plan your strategy for 2018.
Inspections play an important part in any landlord’s calendar, these are a must if you want to protect your property an ensure your tenant is living within the terms of the Tenancy Agreement.
Pre-scheduling these at the beginning of the year can be useful. If they are not diarised in advance they have the potential to be overlooked or for the tenant to find them ill-timed and intrusive. Advance planning will enable you to secure mutually convenient dates throughout the year, ensuring that both you and your tenant are present during these vital visits.
Our advice would be to carry out inspections on either quarterly or half-yearly basis and that you give a written advance notice to the tenant.
Unfortunately, many of us have a reactive positioning to maintenance as far as our rental property is concerned. Whereas we annually carry out MOTs on our cars that cost a fraction of our properties un usually depreciates in value. We mustn’t forget that any property is one of the biggest investments we will ever make and it is important that its welfare is approached in a similar way.
Think seasonally about what will need addressing in winter and what could be done in the summer.
Forward planning is also advantageous in that you will be able to secure the contractors of your choice plus, if your tenant is planning an extended holiday, it may be possible to coordinate your routine maintenance to coincide with this which will allow for unlimited access and minimise disruption for the tenant.
- Financial thoughts
Make sure your finances add up in 2018
It makes sense to keep track of any mortgages you may have. Something that may have been a good deal when you applied for your mortgage, for example, may not be so attractive once the initial discounted period has expired. Know when your mortgage is due for renewal, thoroughly research the market, know what’s out there and be aware of your eligibility.
As part of your financial review it’s also important to monitor the levels of rental return other properties are achieving in the area in which your property is located, do get an up to date rental valuation from a local Letting Agent if need be. It’s useful to keep an eye on this so you can ensure that your own property’s rental price is moving with market forces and is fulfilling its full potential.
Regular small increases which are scheduled in advance are likely to be less disruptive to a tenant than a single unexpected large one.
- Portfolio plan
Investing in property is a journey and if you’re starting a portfolio (or growing one) in 2018 it’s vital to start off with a defined idea of what you’re looking to achieve, what your strategy will be, how you are going to do it. Like any journey, if you set off without knowing your destination you’ll very soon get lost… plus you’ll never know when you actually get there.
It’s also essential to have a timeline in terms of how and when you’re going to acquire the next property, plus when, if at all, you’re likely to release each investment too.
Additionally, pre-preparing for portfolio expansion enables you to monitor your favoured residential areas in order for you to identify those properties that will give you the best yield and potential for capital growth.
- Know your tenant
Having a good relationship with your Tenant is very important, as it will allow you to work together with cooperation and understanding. says Vaughan. It can also be very helpful for self-managing landlords to find out what their tenant’s plans and aspirations are for 2018.
Is your tenant intending to stay on at the property? If not, when are they looking to leave?
Knowing answers to key questions such as these allows a landlord to pre-plan their marketing strategy and start remarketing the property at the earliest opportunity.
If your tenant is planning to leave the property in 2018, also find out the reason why. Often tenants move on because of a change in personal circumstances or relationship status but it’s beneficial to make sure their move isn’t motivated by issues with the property which you need to address.
This month Phillip Hammond has unveiled the Government’s Autumn Budget for our country, in what is being considered a bold pitch to millennials.
From axing stamp duty to council tax premiums and Help to Buy, here are the key points that first-time buyers, homeowners and landlords should be aware of.
If you are saving for your first Home
Hammond declared that the “Number of young people owning their own home has dropped from 59% to 38%”, before setting out his ambitious plan to tackle the housing crisis:
Stamp duty cut for the first-time buyers
The room erupted with applause as Hammond announced that for all first-time purchases up to £300,000, he will axe stamp duty completely. And it was great news for London first time buyers too, as those buying a property worth up to £500,000 will not have to pay stamp duty on the first £300,000, saving themselves £5,000.
Will this work?
We believe that the announcement to abolish stamp duty tax on properties up to £300,000 will certainly give first time buyers a helping hand, but this alone will not fix the main problem which is a lack of housing and affordable housing.
Unfortunately, it is not stamp duty alone that is preventing hopeful buyers from getting on the property ladder – it’s finding a property that’s actually affordable. If there’s no affordable property on the market, people will still not be able to buy.
Hopefully Hammond will deliver on his promise that by the mid-2020s there will be 300,000 homes being built every year – as ultimately, to get first-time buyers on the ladder, the government needs to increase the volume of property on the market, which will in turn help those on the first, second and third rungs of the ladder move up, downsize or sell.
How will this affect the property prices?
If we increase the property supply to levels beyond demand, in the short-term, prices will soften or even come down slightly. In the long term, a higher supply of available property will mean a steady and affordable rate of price growth that will enable the next generation to become homeowners.
Does Britain already have enough land to solve the Housing Crisis?
Hammond was in agreement that we need to build more homes in order to get to grips with our national housing crisis, announcing a series of new homebuilding measures:
- £44 billion of capital funding to help build 300,000 homes annually by mid-2020s
- Homes will be built in high-demand areas and around transport hubs
Interestingly, Hammond announced that it’s not just money that’s needed to fix the housing crisis, but reform. Stating that there’s often a “gap” between planning permission and new homes being built, he announced that Oliver Letwin will be chairing a review to look up ways to speed up planning permission. Shockingly, there are currently 270,000 unused planning permissions in London alone.
Hammond finished by saying that if necessary, the government will take powers to intervene to ensure land is used for housing.
Help to Buy Scheme to receive extra 10 Billion Pounds
As Teresa May promised, the government will find an extra £10 billion for the Help to Buy scheme, which is great news for savers, enabling another 135,000 people to get on the property ladder.
The additional funding will help buyers get a mortgage with a deposit of as little as 5% to buy new build homes.
If you are an investor
100% Council Tax Premium On Vacant Properties
The Chancellor did announce that councils will now be allowed to impose a 100% council tax premium on vacant properties, to discourage landlords and property investors from allowing homes to sit empty. This will double the current fee, which is capped at 50%.
He stated that it “cannot be right” to allow houses to sit empty while many struggle to find somewhere to live.
What will it mean for you?
We are sure you will agree that the landlords across the country are already feeling under pressure from multiple changes in the private rental sector, so it’s important not to rack up any more costs. The new 100% council tax premium will mean it’s even more important for landlords to reduce voids and make sure their rental properties are continuously occupied.
If you are renting
The government recently announced bans on letting agency fees and caps on rent deposits, and now a further step to improve the private rental sector has been announced: tax incentives for landlords who guarantee tenancies of at least 12 months or longer.
For years London’s world-renowned transport system of trains, tubes, busses, and Cycle Superhighways has provided Londoners with fast and efficient ways of getting around the capital.
While major developments such as Crossrail are well-known, relatively smaller improvements and changes can often go unnoticed.
Areas that could soon benefit from improved transport links include South East London. TFL is currently running a consultation the proposed Cycle Superhighway 4, which would run between Tower Bridge and Greenwich, via Canada Water.
Across to the other side of the capital, Sutton and Wimbledon will also see improved transport links and access into and around central London. TFL has recently committed £70m to extend Tramlink’s network through Morden to Sutton. With the twenty-four hour Northern Line service terminating at Morden, there is now an increasing amount of accessible and affordable housing available to young professionals.
All of these developments and improvements mean further good news for prospective buyers, including young families and professionals alike, as transport times fall. This opens up more of outer London as suitable areas to live for those who commute into the capital.
It is clear that buyers should consider upcoming infrastructure plans in any area that they are thinking of purchasing. With London property prices under close scrutiny purchasers should be looking beyond market trends for value added characteristics and areas benefiting from investment in infrastructure.
Existing links and planned developments will have an impact on buyers immediately, for things like commutes and school runs, as well as in the future. Forthcoming improvements will help boost the price of your property in the long run, and help not only first-time buyers but also other individuals looking to transact and climb up the property ladder.