Have you heard of Bitcoin? Cryptocurrency that was one of the success stories of 2017. One bitcoin is now worth around £12,000, up from less than a penny seven years ago.
As this cryptocurrency becomes more mainstream, we think now is the time to look at how it is influencing the property world and how that could affect estate and letting agents in years to come.
What is bitcoin?
First launched almost a decade ago in January 2009, bitcoin is a cryptocurrency which is decentralised from the global banking system. Payments made using the system can be done without incurring any fees.
The total value of bitcoin is now in excess of $180 billion and there are believed to be over 16 million bitcoins in circulation.
The main benefit of Bitcoin system is that it is independent of any Government and traditional banks. It is clearly a growing phenomenon and one that represents a step into largely unknown territory in our increasingly technological world.
How is bitcoin being used in the property industry?
It may come as a surprise but bitcoin is already making waves in the UK property industry as forward thinkers look to adopt its hype and growing popularity to their advantage.
There is evidence of letting agents accepting bitcoin as a payment method for rents and deposits all the way back in 2015. However, the take up of this offer back then was likely to have been minuscule.
Fast forward a couple of years and the words bitcoin and property are becoming increasingly intertwined.
Now there are already a number of estate agencies that accept bitcoin payments from customers.
The latest development is that two properties have now been sold using bitcoin – which are believed to be the first property sales made via bitcoin in the world.
It is thought the HM Land Registry will record these sales as being made in bitcoin, but there is some confusion as to whether it will officially recognise alternative payment methods and cryptocurrencies.
It’s likely that as more sales are claimed to be made via bitcoin, the government will assess the situation and offer a formal decision on how bitcoin can be considered.
Bitcoin is unlikely to take over from cash anytime soon, but that doesn’t mean agents should ignore it. If more customers want the option to pay in bitcoin, then agents should facilitate this or risk losing out to competitors who do.
Now that 2018 is already in full swing and we have read every prediction for 2018 under the sun, we thought it would be a good idea to look back onto 2017 and explore the predictions that everyone thought would happen but didn’t.
1.Letting agents’ fees ban: This may be on its way in 2018 but what happened to it in 2017? It was first announced in November 2016 and after 13 months of consultation the ban had been formally agreed by government. But it hasn’t been implemented! Not that we are in any rush.
Perhaps the fact that agents are already pulling back their fees (notice how few stories there have been on this subject in the consumer media recently?) means the job has effectively been done without the need for a law.
2.Twenty per cent of agencies going bust: On more than one occasion in the past year the industry has been warned that as many as one in five estate agency businesses face closure – not because of a downturn, but because of online rivals.
And while we do not want to underestimate the pressures the traditional estate agencies are facing, we also not denying the fact that the face of the industry is changing.
It’s clear that Purplebricks has made significant impact on the industry but as for the other online agents? It’s too early to say, but one is clear – their gains in the past year seem less than remarkable.
3.The Brexit house price slump: Let’s not deny it Brexit has brought a bit of a drama over our country, and it is not doing much other than sapping the lifeblood from the economy and from the country’s reputation worldwide. However, it hasn’t led to the housing market bloodshed predicted in the six months after the 2016 referendum result.
Localised issues undeniably exist – it has been tough trying to sell houses in Central London and it hasn’t been easy for the agents in East Anglia to let properties because migrant workers have left in droves over the past year. But those pundits who within hours of the Brexit result forecast two years of double digit price falls were as mistaken as those Brexiteers who predicted a pull-out would be easy.
4.The exodus of landlords: We all are more than aware now about the recent tax changes – notably the phasing out of mortgage interest relief, which started in April 2017 – is making buy to let less profitable. Yet the predictions of the mass exit of Buy To Let landlords did not happen! And we can certainly say that we haven’t noticed any sign of the mass sell-up predicted by some siren voices. Growth within the sector is certainly negligible but as for the forecast of mass defection…it didn’t take place.
5.OnTheMarket becoming the second largest portal: There was a lot of talk in 2017 about OnTheMarket becoming the second largest portal in Britain and displacing Zoopla to a third place. While some OTM directors are set to be amongst the best-paid in the industry after the Agents’ Mutual 2018 float, there remains fog around real data revealing membership and fees, and a heavy mist over site visits. Like Purplebricks’ completion rates, such figures did not appear in 2017 despite much anticipation.
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.