Andrew Turner, chief executive of buy-to-let lender Commercial Trust, looks ahead at the changes landlords can expect in 2018.
Adapting to change has proved a valuable skill for many landlords over the past couple of years.
There has been an onslaught of legislation which has proved financially damaging for many landlords in recent times.
However, returns have remained healthy and many investors have reviewed their property ventures and made changes necessary to maintain profits.
Still life in the market
I expect to see more of the same enterprise and resilience as we progress through 2018.
Here are a few good reasons why I think buy to let remains a viable consideration for many landlords:
- Demand for rental property remains sky-high, with Government plans to reverse the housing shortage likely to take decades to complete, meaning there is a willing market for investors to cater to;
- Returns on buy-to-let continue to generate profits for landlords in most areas of the UK, with yields continuing to rise;
- Lenders continue to offer a wide choice of products meaning there is healthy competition in the marketplace;
- Despite the recent Bank of England Base Rate rise, which led to some mortgage rate increases, in the context of historical interest rates, we remain at the very low end of the scale. This has seen further investment in buy-to-let property and the remortgage market;
- The Government appears to have acknowledged the role that the private rental sector has to play in the long-term resolution of the housing crisis – and forthcoming changes to Universal Credit, along with the proposal to incentivise landlords to offer longer tenancy agreements, underline that there may, at last, be scope to offer landlords a carrot rather than to beat them with a stick.
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Challenges to be aware of
Aside from the tumult expected from Brexit, below is a summary of issues for landlords to monitor in 2018:
- The bedding-in of the PRA changes and how this impacts your remortgage and purchase plans;
- The increasingly complex lending environment, born of legislative change and widening product choice;
- Any Bank of England Base Rate changes, which may impact mortgage rates;
- Changes to the letting industry in England, Scotland and Wales, including the likelihood of a ban on letting agent fees in England and Wales;
- Any Government move to incentivise landlords to offer 12-month tenancies, currently under review;
- Changes to the Universal Credit process, which in theory at least, should offer landlords greater reassurance that rent will be paid on time;
- New Minimum Energy Efficiency Standards; by April 2018, landlords will not be able to provide new tenancies unless their property has a minimum Energy Performance Certificate (EPC) rating of ‘E’;
- Potential new rules regarding the compulsory fitting of carbon monoxide alarms by landlords throughout England and Wales, something already in place in Scotland.
Staying on the right track in 2018
As mentioned earlier, landlords have had to show great resolution and a willingness to address the challenges put in front of them over the past couple of years.
I expect this to be put to the test once again in 2018, but by keeping on top of changes and having a clear investment strategy that takes into account how these might affect returns, I believe that buy to let has plenty to offer investors into 2018 and beyond.
Andrew Turner is the chief executive of buy-to-let lender Commercial Trust Limited. This article does not necessarily reflect the views of loveMONEY.
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