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Why over 40% of landlords want to expand their property portfolios

by Alysha Taylor SmithPosted on

The property market has seen its fair share of challenges in recent times, from rising bills to a constant stream of government regulations. Landlords have had to navigate more economic uncertainties than they are used to. However, despite the challenges, a surprising number of landlords are feeling positive about the future and are even looking to expand their property portfolios.

According to a study conducted by lending service Landbay, over 40% of landlords have expressed their intention to grow their portfolios in the coming year. So, why are landlords considering expanding their property portfolios in 2023? 

Rising Utility Costs

Fluctuating temperatures contribute towards higher utility costs and tenants may rely more on electricity to cool or heat their living spaces, leading to increased utility costs for landlords and tenants alike. Higher temperatures can result in increased water usage, further burdening the electrical grid and city resources, thereby escalating costs. Landlords offering bills included should carefully consider the monthly charge to make sure that it covers expected usage. 

High Tenant Demand:

One of the key driving forces behind landlords’ willingness to expand is the sustained high demand for rental properties. As the number of potential tenants continues to exceed the available properties, occupancy rates remain high. A recent survey by RICS reported a 32% increase in tenant demand in just one month. This surge in demand has also reduced the average void period in England from 23 days to 17 days in February.

Potential Drop in House Prices:

Another reason contributing to landlords’ positive outlook is the possibility of a drop in house prices. Approximately one-third of respondents in the study cited this as a factor influencing their decision to expand their portfolios. Declining house prices may present an opportunity for savvy investors to acquire attractively valued properties, anticipating future price surges.

Opportunity for Higher Rental Yields:

While the property market may have been less lucrative than other investment avenues in recent years, there remains a silver lining for landlords. The opportunity to leverage properties using mortgages can substantially boost returns. As mortgage rates begin to stabilise and inflation eases, landlords can consider tracker mortgages with falling monthly interest repayments, supporting higher rental yields.

Lower market competition:

The private rental sector has witnessed a significant decline in available rental properties, with around 70,000 landlords leaving the market in 2022 alone. However, landlords who have weathered the challenges are presented with better opportunities to differentiate their properties and secure higher rents.

Rising Rents:

Rent prices have been increasing at their fastest rate in seven years, rising by 4% in 2022. This trend is expected to continue in 2023, with forecasts suggesting rents may rise by as much as 12.91% this year. The combination of rising rents and declining house prices may recalibrate rental yields to more attractive levels, encouraging landlords to remain in the market.

Amidst the uncertainties, some landlords see a window of opportunity to capitalise on the market conditions. Faltering house prices, coupled with rising rents, might offer attractive investment opportunities that confident landlords can seize.

While there are positive indications, not all landlords share the same optimism. Approximately 35% of landlords expressed a more neutral stance, citing concerns over government interference, negative stereotypes surrounding landlords, and overall market uncertainty. 

Despite this, a considerable proportion of landlords remain optimistic about the future and are eager to expand their property portfolios. High tenant demand, the potential for declining house prices, and rising rents are among the key factors fueling this positivity. While uncertainties persist, landlords who approach the market with confidence and strategic thinking may find themselves well-positioned for success in the coming years.

Reasons for new landlords to join the buy-to-let market

by Alysha Taylor SmithPosted on

The rental market is experiencing continued demand, with indications pointing to this trend continuing in the long term. With lower numbers of rental properties than potential renters on the market, the rental market is set to become even more competitive causing difficulties for young renters looking for suitable accommodation.

What do landlords have to gain from the current rental supply imbalance? 

Reduced Vacancy Periods

With a higher demand for rental properties, landlords can enjoy shorter vacancy periods. Properties are more likely to be rented out sooner, minimising the time properties remain unoccupied. This ensures a steady stream of rental income and mitigates the financial strain associated with prolonged vacancies.

Selective Tenant Screening

The growing demand for rental properties allows landlords to be more discerning in their tenant selection process. Landlords can carefully screen potential tenants, choosing those with excellent rental histories, stable incomes, and responsible behaviour. By selecting reliable tenants, landlords can minimise the risks associated with property damage and unpaid rent, ensuring a smoother and more profitable rental experience.

Increased Rental Prices

The competitive rental market resulting from rising demand empowers landlords to charge higher rental prices. As demand surpasses supply, landlords gain leverage to adjust rental rates to match market conditions. Higher rental prices enable landlords to maximise their return on investment and boost their profit margins, leading to increased financial stability and growth.

Expanded Profit Margins

The combination of shorter vacancy periods and higher rental prices contributes to expanded profit margins for landlords. By reducing the time a property remains unoccupied and optimising rental rates, landlords can achieve a more favourable return on their investment. These improved profit margins create opportunities for further property investment, property maintenance, and enhancement of rental offerings.

The increasing rental demand in the market has a positive impact on landlords in various ways. Landlords benefit from shorter vacancy periods, enabling them to generate consistent rental income. They can also be more selective with tenants, reducing the likelihood of property damage and rent arrears. Additionally, the competitive market allows landlords to charge higher rental prices, leading to improved profit margins. With careful management and adaptation to market trends, landlords can thrive in the evolving rental landscape. Additionally, as more landlords enter the market the supply and demand crisis will inevitably level out, causing positive knock-on effects for tenants. 

Housing market predictions for Summer 2023

by Sorcha DugmorePosted on

The UK housing market has been subject to instability and lack of clarity for Landlords and tenants over the past few years, but are we heading towards a more stable future? 

This month, recent data from HMRC showed that property sales fell by 19% in March, a somewhat expected trend which we also saw hitting the market in March 2022. Additionally, HMRC stated that the total transactions this year have been “significantly lower” than the previous year, but noted that this activity was boosted by a boost in demand and the stamp duty holiday.

Despite the annual fall, it looks like there are some silver linings. This year we have seen a month-on-month uptick of 1%, breaking the trend of declines seen in previous months, such as the 4% monthly decline in February and a 3% dip between December and January.

The head of lender relationships at Legal and General Mortgage Club, Danny Belton, stated it was “positive to see an uptick in transactions from February to March kickstarting a strong spring selling season”.

It isn’t possible to accurately predict the state of the housing market going forward, and there are still many obstacles for landlords to overcome; however it seems like there might be some positive outlook. According to a recent report by Zoopla, the UK property market is currently experiencing its strongest sales market in a decade. 

Letting agents help to navigate red tape

by Sorcha DugmorePosted on

Landlords have been advised by a PropTech engineer to seek guidance from letting agents to navigate red tape.

The rental market has undergone many changes in recent years, causing some lack of clarity amongst Landlords. With so much to keep track of, it can be challenging to stay up-to-date with the latest changes alone, that’s why letting agents are a valuable resource for Landlords who want to protect their properties and avoid penalties.

Neil Cobbald, Managing Director of PayProp UK, stated “No matter which party wins the next election, reforming the private rental sector will be high on their agenda. Proposals to reform the PRS and introduce new rules and regulations cover everything from energy efficiency to tax returns to anti-money laundering measures”.

The long-awaited renters reform bill proposes the removal of section 21 evictions. If the ban is implemented, Landlords will need to have a valid reason for evicting tenants, such as rent arrears or antisocial behaviour. Additionally, the renters reform bill suggests an abolition of letting fees and an introduction of a new lifetime deposit scheme. 

These changes are expected to improve transparency and affordability for renters, but they will also place additional responsibilities on Landlords to manage deposits and rental payments.

Alongside new regulations being implemented across the country to ensure the safety and energy efficiency of rentals, Landlords must ensure that they are up-to-date with new laws to avoid large penalties from non-compliance. 

Working alongside a letting agent will ease these concerns and provide Landlords with the peace of mind that their rentals are complying with new laws. 

To deal with upcoming changes, Cobbold urged “Letting agents and Landlords make a perfect match. The agents have the professional and managerial expertise to get the optimal return from the Landlords’ valuable assets, ensure their tenants have a great rental experience and protect them from the penalties of non-compliance.”

EPC regulations to be delayed until 2025

by Sorcha DugmorePosted on

Technical difficulties in the UK government’s Energy Performance Certificate (EPC) database have led to a delay in implementing new regulations for landlords in England. As a result, Landlords will not be required to make certain energy-efficient improvements to their rental properties until 2025 at the earliest. 

Why are EPC regulations becoming stricter? 

According to a recent survey, 90% of tenants believe that energy-efficient homes are essential, and 82% would be willing to pay higher rent for such properties. Additionally, poorly insulated and inefficient properties can lead to 21% higher energy bills, on average, for tenants. Furthermore, the carbon footprint of a typical rental property is 19% higher than that of an owner-occupied home.

Despite the delay in new EPC regulations, Landlords should take steps to improve the energy efficiency of their rental properties as soon as possible. Making energy-efficient upgrades can save an average of £350 a year on energy bills, and upgrading from an EPC rating of D or E to an A or B can add an average of £16,000 to a property’s value.

The most common ways to improve a property’s EPC rating include:

  • Adding (or improving) loft and wall insulation
  • Replacing older boilers for more sustainable alternatives. (This may also save you from costly boiler repairs). 
  • Installing solar panels or alternative methods of creating sustainable energy within the rental homes. 
  • Ensure that glass in your properties is double glazed to improve energy efficiency. 

It is vital to note that the delay in implementing new EPC regulations is a significant setback in the UK’s efforts to achieve its goal of net-zero emissions by 2050. However, Landlords can still make a significant impact by taking action to improve the energy efficiency of their properties. By doing so, they can not only save money and increase the value of their property but also improve the quality of life for their tenants.

Why Landlords are holding onto their investments – A positive outlook for Landlords in the UK Housing Market

by Sorcha DugmorePosted on

The UK property market has been unpredictable for some time now, it’s important for Landlords to carefully consider the pros and cons of selling up versus holding onto their investments. While there are certainly challenges to be faced in the current housing market, there are also reasons to be optimistic about the future.

The current housing crisis in the UK has been a highly talked about topic through the property investor communities over the last year. The crisis, caused by a lack of Landlords and an increasing demand for rentals, has caused significant impact to both property investors and individuals seeking suitable rental accommodation. 

The Guardian reported on the top challenges faced by current Landlords and buy-to-let investors:

  • Recent stamp duty increases have made buying new properties more expensive, reducing the amount of new landlords entering the market
  • The phased reduction of mortgage interest tax relief has reduced landlords’ profits, making it less financially viable to continue renting out properties
  • Proposed changes to the eviction process (For example, abolishing section 21 evictions) could mean that landlords may have to give tenants longer notice before evicting them

However, despite these challenges Landlords are holding onto their property investments and here’s why:

  • Yields – Rental yields in the UK are still high compared to other countries, providing a strong income stream for Landlords. Landlords have justifiable reason to raise rental prices in the current market, maintaining profits in the short term and potentially leading to high-yields in the long-term when financial strains ease again.
  • Demand – The demand for rental properties is likely to remain high, as many people continue to struggle to get onto the property ladder due to rising house prices. This creates a pool of tenants willing to pay higher monthly rent, and provides landlords with a wider choice of higher-quality tenants who are less likely to miss rental payments.
  • Long-term investment – While the market currently presents some concerning challenges and instability, it’s important to remember that it will stabilise again. When that happens, Landlords who hold onto their investments might benefit from increased yields in the future. 

As a Landlord, you should ensure that you are well-informed about changes to the rental landscape in the UK and how your investments will be affected. It’s best to take time to properly research the potential implications the changes have on your investments and weigh up the risks vs benefits. Whilst it is tempting to sell up when there are challenges in the market, impulse decisions can lead to large losses and potentially missing out on opportunities in the future. 

New ruling gives Landlords more power over evictions

by Sorcha DugmorePosted on

According to a recent announcement, Landlords will be given the power to evict unruly tenants, despite the proposed abolition of the section 21 ruling. 

There has been concern between Landlords following the discussion to get rid of the section 21 ruling, with Landlords concerned that they will have less control over their properties and not be able to evict tenants who breach their tenancy agreement.

Section 21 recap  

In 2019, the UK government announced that Landlords would no longer be able to evict tenants without a legitimate reason under the new Renters Reform Bill. This decision was met with significant opposition from landlords, with 84% of them against the ruling, according to a National Landlords Association survey. 

Landlords were concerned that this would make it more difficult to deal with tenants who were not paying rent, causing damage to the property, or violating the terms of their tenancy agreement.

Good news for Landlords 

The good news is that Landlords will be given more power to evict tenants under Section 8 .

The proposal is that this will be achieved through the introduction of a new model tenancy agreement, which could allow Landlords to evict tenants without providing a reason after four months of the tenancy. 

This means that Landlords will be able to serve notice on tenants more easily and quickly, ensuring that their property is protected.

Eviction restrictions

This power to evict will come with restrictions; Landlords will not be able to use this power to evict tenants who have raised concerns about the condition of the property or have made a complaint about the landlord. 

Additionally, Landlords will still need to follow the procedure for eviction, including providing the tenant with the correct notice and obtaining a court order.

The introduction of this power to evict is positive news for Landlords. This will give them more control over their properties and allow them to take action when necessary. However, there are some potential negatives to consider. Some tenants may be concerned that this power could be abused by Landlords and lead to unfair evictions. It will be important to ensure that the correct procedures are followed and that tenants are treated fairly.