In the current climate of interest rate rises and significant regulatory reform, it’s more important than ever that landlords – both accidental and those investing in the sector – are able to navigate the changing landscape.

Here are our tips for keeping up to speed:

1. Unprecedented demand. Tenant demand currently far outstrips supply and, given rising interest rates which impinge on mortgaged buy-to-let landlords in particular, and the possible impact of the Renters (Reform) Bill, we don’t anticipate undersupply easing dramatically any time soon. This is putting upward pressure on rents. We are forecasting average prime rental growth of 5 per cent in London and 3 per cent in the commuter belt this year, followed by a further 3 per cent and 2 per cent rise respectively next year. Landlords do, however, need to be aware of affordability issues for tenants.
2. Renters (Reform) Bill. Currently awaiting its second reading in parliament, this legislation will spell the end of the assured shorthold tenancy and no-fault evictions. It will, however, also give new grounds for landlords to recover possession of a property they intend to sell or occupy which is important for protecting their ultimate liquidity. The rent review process will become a bit more complicated with landlords required to serve a specified notice on tenants, and tenants able to refer to a tribunal for adjudication on whether the suggested rent reflects market value.
3. To buy to let or not buy to let? We expect to see some of the more indebted landlords look to reduce their portfolios, so should investors still be considering the sector? If you are relying on mortgage debt then it’s a case of doing the sums carefully. Rental property has long been considered a safe asset class, currently offering good yields. So with good advice and the services of a mortgage broker, who can help you access the best possible range of options, it is certainly worth looking into, particularly in light of the high demand and lack of available stock to rent. If you hold stock in your own name you’ll be entitled to restricted tax relief on mortgage interest while those holding in a corporate structure won’t have that constraint. It may be worth seeking advice and thoroughly investigating the possibilities.
4. Opportunities. Larger, equity-rich landlords, for whom interest rates and reforms will be less daunting, and those investing for the long term may well see this as a time of opportunity. There could be good buying opportunities out there too, for example in some new homes developments where there may be a drive to shift stock.
5. What about rents? We’ve seen prime rents rise significantly over the past four years. If you haven’t been following the market then it would be well worth seeking advice on values now so that you enter the new regulatory regime with rents as close to market value as possible. Bear in mind though, that a good tenant is a happy tenant.

There’s a lot for landlords to take on board and, for some, this new environment may trigger an exit or rethink. For others, it may trigger opportunities. Good advice is essential.

For more advice on the prime residential sales and lettings markets take a look at our recent webinar.

Further information

Contact Jane Cronwright-Brown

Read more about the Renters (Reform) Bill

5 tips for navigating the prime residential sales market this summer

Understanding the Renters (Reform) Bill