Written by Daren Cope, Amber Homes & Professional Properties
The buy-to-let market is going through a rough patch. With legislative change on the horizon, coupled with bleak ROI forecasts, many landlords are now questioning whether or not they should be playing the property game at all.
Specifically, it’s the smaller landlords (1-5 properties) who are looking to sell up – and it is those landlords to whom we speak today. We’re going to break down the main problems at hand, and hopefully help you decide your best course of action.
We’ll start with the Rental Reform. It’s caused quite the stir since its announcement, with the most controversial proposal being the scrapping of Section 21, which will mean tenancies can only end if a tenant ends it or a landlord has a valid reason defined in law. There’s also the reduced limitations on pets, the doubling of notice periods for rent increases, and of course the abolition of all fixed term tenancies.
Quite understandably, this has been described as the ‘biggest shake-up in the private rented sector in 20 years’. Section 21, pet restrictions and fixed term tenancies have been staples of landlord rights for the longest time; the prospect of losing them hasn’t been particularly well-received, to put it lightly.
Compounding these concerns further is the increasingly rough state of the economy. The cost of living crisis has called into question the affordability of rent for a striking number of households, while landlords have little choice but to increase rents to cover their own rising costs – and even with rent increases, rental yields for landlords are reportedly down.
It’s all feeling a bit doom and gloom. For landlords, for tenants, for everyone. There’s no denying the difficulties the property market is facing, and it’s easy to see why more and more landlords are looking at selling up. The question is… should they? Should you?
We’re not going to sit here and promise everything will be amazing if you stay in the BTL game… but we can at least confront each of the issues at hand, look at them objectively, and offer our own opinion as to how you might respond to them.
First, the Rental Reform Bill. Although it has technically been in circulation since 2019, it’s still in its early stages (basically because of Covid). There’s a good chance the Bill won’t become law before 2024, and with much debate still to be had on it, there will almost certainly be revisions and amendments.
As for the measures themselves, it’s not all bad news for landlords. Section 8, for instance, is getting juiced-up; you’ll find it easier to regain possession from anti-social tenants and tenants in arrears. You’ll also be able to use Section 8 if you wish to sell or move into your property. Moreover, there have been pledges to improve court proceedings for landlords.
All in all, the best thing you can do is read and understand the Bill so you can best prepare for the changes. Sure, some of the measures are more difficult to come to terms with than others – but it’s really nothing you can’t handle.
So, the cost of living crisis – admittedly, a bit harder to navigate. But here’s one way of looking at it: the BTL market isn’t going anywhere, and despite the troubles of the economy, the BTL market isn’t in turmoil in any real systematic way. The road may be bumpy for a bit, but the wheels keep turning.
Besides, if you do decide to sell your property, chances are it’s going to be picked up by another landlord looking to expand their portfolio (this is what’s happening in real time). Granted, landlords with a bigger portfolio inherently have a bigger safety net – but if they’re going to turn a worthwhile profit on the property, why shouldn’t you?
Heck, you could even take a leaf out of their book and look for opportunities to expand your portfolio, if you have the means. Because there will be opportunities, and someone will capitalise on them.
Anyway, it goes without saying that you should do whatever you feel is best. Times are tough, but not impossible; our advice is not to panic and not to abandon ship, but to sit tight, and perhaps even to go in the complete opposite direction. While you might call it crazy to suggest portfolio expansion in the face of Rental Reforms and a purported property armageddon…
… It might just be the most rational response of all.
About the author
Daren Cope at Amber Homes & Professional Properties has over 20 years of experience in property and has shared his thoughts on the government’s plans.