The private rental sector has been volatile for some time, with changing regulations, fast-rising rents and difficulties for landlords, and that doesn’t look like ending any time soon. What with a reduction in the buy-to-let market, further increases in the cost for tenants and uncertainty over what measures the new government might bring in, the whole sector is holding its breath.
A Fall in the Buy-to-Let Market
Since bespoke buy-to-let (BTL) mortgages were first introduced in 1996, the market has steadily grown — until this year. Figures show that the first three months of 2024 saw the first ever fall in the number of BTL mortgages.
The number of current BTL mortgages fell from 2,039,000 to 1,980,000, while new loans granted during the period fell much more dramatically, from 25,280 to 12,422. More encouragingly, however, the number of BTL mortgages in arrears hasn’t increased, while a rise in repossessions seems to be mainly down to lockdown backlogs being cleared.
There are a number of potential reasons for the sharp drop in new BTL mortgages, including more stringent affordability tests, the removal of higher-rate income tax relief on mortgages, and the stamp tax surcharge on second properties. Perhaps most crucially, though, most BTL mortgages are interest-only, and therefore more vulnerable to recent high interest rates.
Private Rents — a Record Increase
Figures issued by Rightmove suggest that private rents have risen to record levels. In the second quarter of 2024, rents in London were 4% above the same period in 2023, at an average of £2,661, while outside London the average rise was 7%. This varied considerably by region, with North-East England showing a 10.3% rise.
This seems to be mainly down to the shortage of properties available, with each available property attracting an average of 17 enquiries. The number of properties is still below pre-pandemic levels, and seems to be connected with the fall in BTL mortgages.
While this might seem a boost for landlords, in the longer term it isn’t such good news, since it could lead to tenants getting into difficulties paying their rent, creating gaps in income.
What Does the New Government Have in Store for the Sector?
With a new government, there are clearly going to be slightly changed priorities about reforming the sector. While their stance on some areas still isn’t clear, a number of proposals have either been included in the King’s Speech, or else were already declared policies. Among the most important are:
- A commitment to abolish Section 21 evictions.
- Considering introducing caps on increases in private rents.
- Tightening of energy efficiency standards, with the aim of requiring a minimum C rating by 2030.
- “Awaab’s Law”, relating to control of damp and mould in social housing, is planned to be extended to private rentals.
- An end to bidding wars and a cap to upfront payments for securing properties.
It’s essential for all private landlords to keep up to date with these changes, in order to make sure you’re not accidentally breaking the law.
Though the coming months could be a tricky period for the private rental sector, the best way for landlords to weather it is to make sure your rents are coming in as promptly and efficiently as possible. Give me a call to see how I can help you both pursue your problem tenants and help those in genuine trouble to pay their rents as soon as possible.
