2018 will be an interesting year for the lettings market as many legislative changes come into play. These developments affect both the investor and the tenant. Some of these changes are long over due, particularly those protecting the most vulnerable but there may be unintended consequences.
0% Tenant Fee
This year will see agents begin to switch to a 0% fee structure. This will be welcomed by many tenants as it will decrease the upfront costs of renting a property. All the costs of letting will therefore have to be paid by the landlord. Rather than accept a reduction in net income some Landlords will seek to recover the costs through increasing the rent. In areas where affordability is already an issue, this may not be an option.
Also looming on the horizon is the enforcement of minimum energy efficiency standards which David Cox, Chief Executive, ARLA Propertymark, said: “ Could see up to 300,000 properties being taken off the market because they don’t reach the minimum requirements”
The withdrawal of tax relief on interest payments has not yet had much impact but will eventually be a major issue for Landlords who are highly geared.
The Cumulative Effect
The cumulative effect of these measures could be a very significant reduction in the availability of properties to rent as Landlords begin to find low net yields unacceptable. Basic economics suggests that if supply does fall, rents will rise.
Our suggestion is that Landlords should take a hard look at their portfolios. Take advice regarding their statutory obligations and upgrade properties where cost effective, otherwise consider rationalising properties and reduce gearing. We are happy to give initial advice without any obligation as it is important to realise the effects of non compliance with the legislative minefield that Landlords now face.