An inconvenient truth is 100% of rents will be going up?

by Readers Question

15:58 PM, 1st December 2016
About 2 years ago

An inconvenient truth is 100% of rents will be going up?

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An inconvenient truth is 100% of rents will be going up?

A survey at present on property 118 suggests 71% of landlords will increase rents as a direct result of section 24. Here is why I believe 100% of rents will inevitably have to go up. inconvenient truth

Like a lot of landlords, I have not increased rents to my tenants for the last few years or so for many reasons, but for 3 in particular.

1. Once you have found a good and decent tenant who looks after your property and pays the rent on time, you do not want to lose them.

2. Interest rates have been low for many years which have reduced my overheads.

3. If I currently tell a tenant I am increasing the rent they have the option of saying “no thanks” and move on to a new landlord in the next street.

This is all about to change.

If we assume that the 71% figure is correct, then that means approx. 3 million tenants will have rent increases within the next year or so. Coupled with the fact thousands of landlords including myself intend to sell properties in the next year or two mean that option 3 is no longer available to most tenants, as the number of available rented properties reduce.

A report out today states net migration year to June was 335,000. Where are they going to live. Another report out today states there are a half million people homeless in Britain today. Interest rates have been at record low levels for many years, but the simple fact is they only have one way to go. Its any ones guess when they will go up but it is inevitable.

The existing good tenants you have will not now be looking to move because rents will be going up across the board all at the same time.

Back to my original point. The reason I believe 100% of rents will go up is because a landlord is a business person first. If 71% of landlords are increasing rents around me, I will need to increase rents as well for 2 main reasons.

If section 24 goes ahead it is guaranteed it will be followed by further assaults by the government on the private landlord. Interest rates will inevitably go up. It makes total business sense to increase rents now when every other landlord is doing the same, so you can build a pot of money to help safeguard you and your tenants future. Even if you have millions in the bank and section 24 has no impact on you it makes no business sense to rent out your houses for example £500 monthly when all the landlords around you are charging £600.

Many of my tenants have become friends and as such I owe it to them to keep my business viable. If my business fails most of my tenants will have nowhere to go.

This is the truth that will be very inconvenient for this government.

Tyrone



Comments

Simon Griffith

16:53 PM, 1st December 2016
About 2 years ago

Quite right Tyrone. There are more reasons too :
Once a Brexit deadline is announced then you can expect a stampede from Eastern Europe which will make the 300,000 net seem paltry as those people considering coming here make their minds up before the borders 'close'. I expect that this is already happening. It is a fallacy that those already here will go home or not be allowed to stay - it just won't happen.
Build to rent operators have shareholders to please and with the ironic assistance of this pathetic government will push for the absolute maximum rent on each and every property (already charging record rents in my area). It is their duty to do so and they won't think like PRS landlords who have for many years generously shared their success (low interest rates, high demand, immigration etc) by offering loyal tenants below market level rents.
The illusion of helping tenants by banning agency fees will of course find itself manifested in higher rents - someone has to pay for the agents and the landlords are running out of slack to absorb any more costs.
I understand that buy to let sales underpinned a lot of new developments and this will clearly no longer be the case. The shambolic planning system. NIMBY outlook and reduced B2L demand will mean whatever the government says the number of new units built will fall further behind -widening the gap between demand and supply further.
It's all so obvious to me and a tragedy that the government just can't see this or doesn't care.

Old Mrs Landlord

21:57 PM, 1st December 2016
About 2 years ago

A further incentive for landlords who are little or not at all affected by Section 24 to raise rents is all the agitation for rent controls by Labour politicians, Shelter, Generation Rent et al. Landlords who aren't in the habit of raising rents between tenancies simply can't risk being caught with their rents well below the average when minimum annual increases get capped to the rate of inflation or whatever.

Old Mrs Landlord

22:02 PM, 1st December 2016
About 2 years ago

A further incentive for landlords who are little or not at all affected by Section 24 to raise rents is all the talk of rent controls by Labour politicians, Shelter, Generation Rent et al. Landlords who aren't in the habit of raising rents between tenancies simply can't risk being caught with their rents well below the average when minimum annual increases get capped to the rate of inflation or whatever.

Old Mrs Landlord

22:03 PM, 1st December 2016
About 2 years ago

Correction, I meant maximum not minimum in above comment.

Larry Sweeney

22:39 PM, 1st December 2016
About 2 years ago

I completely agree with your comments Tyrone. There has been an assault on the PRS for quite some time. Sect 24, Deregulation act, Tenancy deposit regulations constantly changing and Landlord licensing not to mention the idea that Landlords may have to report every three months to HMRC.
The constant stream of regulations and taxes is nothing short of disgraceful. We need a Trump here who understands The private sector and commits to scrapping 70% of regs.
We should not be afraid to speak out forcefully, Those imposing taxes and regs are pen pushing idiots with no concept of life outside the cushy confines Government or Council paid jobs..

Barry White

11:22 AM, 2nd December 2016
About 2 years ago

Isn't this just 71% of Landlords who will be affected, as opposed to 71% of all landlords? The government say that just 1 in 5 landlords (20%) will be affected by S24. As such, this points to 14.2% of landlords increasing rents (14.2% being 71% of 20%).

Assuming that all landlords own the same number of properties (as appears to be the tacit assumption in the article) then the actual figures for the number of tenants receiving rent increase notices is 600k (14.2% of the 4.3mln tenants) as opposed to the 3mln (71% of 4.3mln) cited in this article.

Graham Bowcock

11:26 AM, 2nd December 2016
About 2 years ago

I agree about rising rents and in many areas my firm deals with I have never seen the like of the increase now achievable. The point has been well made about keeping good tenants and I am sure that most landlords are keen not to lose those with whom they have built a mutual relationship (the longest serving tenant in one of my own houses has done 17 years).

The issue isn't just about rises for the sake of it or to cover costs (this is the old chestnut about cost v value) but simply the effect of market forces as property supplies dwindle. My view is that the middle ground of landlords (decent people managing their own property alongside their day jobs) will take their ball home and look at less challenging ways to invest their money (less compliance, less risk) and reduce supply over time. My worry is that the lower end of the market will continue unabated with poorer landlords continuing to provide low costs housing with little recourse to the legal niceties.

The sector has had a battering over the past couple of years and the Government have failed to recognise that they are slowly compounding problems for tenants. I cannot see the logic in making life so difficult for landlords when the public sector cannot adequately house all those who need it. The PRS provides a worthwhile benefit to the community and we need to bang the drum for it loudly and clearly.

Roll on the New Year and let's see what that brings............................

Graham

David Wright

14:02 PM, 2nd December 2016
About 2 years ago

I think some of us portfolio landlords are stuck in the middle ground. We bought as individuals because that was what was best advise at the time. Now the rug has been pulled and we are left with difficult decisions. The new up and coming lanlords and cash rich will be waiting in the wings for us all to offload our properties. Some with tenants in situ. Prices will probably drop again because of the glut.. so rich pickings for some.. But we didn't have a crystal ball.

H B

13:49 PM, 4th December 2016
About 2 years ago

Two potential flaws in your argument:

1) About half of landlords do not have mortgages and so will be unaffected by s24. They have no economic requirement to increase rentsignal other than an opportunistic one.

2) 100% means absolutely every landlord in the country - statically this is highly unlikely. Apologies is this is s bit pedantic!

Si G

6:31 AM, 12th December 2016
About 2 years ago

Reply to the comment left by "Larry Sweeney" at "01/12/2016 - 22:39":

Youre right Larry, the b2let market should be self regulating the tenant can pick and choose and the market (in a free market economy) will find its own level, Govt seems to be against small business in so many ways.


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