Will Leyland, 28 July 2016
An independent report published this week by the Centre for Economic and Business Research and commissioned by the National Housing Federation predicts that the UK economy could contract by £145 million in the next 10 years if the rate of growth in new housing completions falls at the same rate as it did in 2008.
In concerning news for the government, it is becoming apparent that buy-to-let landlords are powering a large proportion of growth in the Private Rented Sector (PRS) and that as current trends continue supply will be dwarfed by demand in the coming years.
As it currently stands rents are returning a healthy yield for most private investors but, as supply is severely squeezed, landlords could feasibly charge much more at the expense of private renters.
This is a complex issue that will take years to tackle effectively. This places landlords and private investors in a strong position as it becomes more difficult for first-time-buyers to find their way into a housing market that is seeing prices rise quickly and out of sight of average salaries.
It seems true certainly that those already within a position to own buy-to-let could become part of an increasingly exclusive and lucrative club with or without the changes as recent estimates are showing that the housebuilding deficit runs into the hundreds of thousands. This seems to be a win-win situation for existing buy-to-let landlords, as many argue that building more homes for rent or shared-ownership would help keep housebuilding and the economy going in a time of economic austerity. Should the supply of rental property increase and support increased it will become easier for savvy landlords to build a good, profitable portfolio.
Recent attempts by the government to curb the high returns from rental property seem to have only affected London as mortgage lending hit a twelve month high in June. Certainly properties across the North and Scotland have seen nowhere near the types of increases that the capital has and this has meant that a slowdown isn’t likely to appear in the near future. As London property prices stand at nearly double most of those in the North, it follows that investors would need to pay nearly twice the increase in tax which has lead, in-part, to the slowdown.
The news seems to indicate that any government looking to solve a housing crisis that has evolved from a new landscape to that of previous generations needs to appeal to buy-to-let landlords to come further into the market.
A key indication that the government has noticed this need is the further regulation of ‘rogue’ landlords and letting agents. Customer satisfaction for letting agents is rising steeply with the introduction of new legislation and professional agents are leading the way.
A deluge of complaints about unscrupulous landlords and agents is largely being addressed by the new generation of professionals and this has had an impressive knock-on effect for the profits and yields for buy-to-let landlords who are experiencing a higher and longer tenancy rate as well as the ability to take a hands-off role – enabling them to concentrate on growing their portfolio.
It is hoped that by working with landlords and buy-to-let industry that housing improvements can be made for renters who are not likely to enter the housing ladder for at least a decade. Home ownership issues are unlikely to be resolved for at least ten years and it seems the solution to this is providing help to good buy-to-let investors and credible, professional letting agents who can provide the service and knowledge for a comfortable experience for both parties.
Will Leyland, 28 July 2016