10:16 AM, 2nd December 2022, About 2 months ago 11
Most landlords will have spent a lot of time and money on housing tenants, whether it’s in just one property or a massive portfolio. But, has the time come to give all of this up?
I don’t know whether we should sell up or shut up.
And here’s why.
Leaving aside the fact that house price growth is slowing, and houses are struggling to sell, there are some other issues that concern me.
Firstly, increasing buy to let mortgage rates will be pushing up business costs and these costs, inevitably, are passed on to tenants by most landlords.
That’s not a practice I always agree with, but I’ve had a look at some of the new rates and the stricter lending criteria and I’m wondering whether it will be easier just to sell and leave.
In addition to stricter lending rules, lenders are also looking for higher deposits which means that there will be a lot of landlords looking to remortgage over the next few months that will struggle to find deals that make the idea of BTL work.
That will also mean they will sell up and remove their home from the private rental sector.
I know that we need to hold onto a property investment for the long term, I’ve been told at least 10 years, to really enjoy the effort you put into building a portfolio.
But if house prices do start falling, at what point does a landlord consider whether it is worth being a landlord?
I suspect there are lots of landlords who jumped onto the bandwagon when interest rates were low, they didn’t need much of a deposit and the LTV was more beneficial than it is now.
Back then, it was a win-win situation with mortgages not hard to get hold of, houses were cheaper to buy and there was a long line of tenants keen to move in.
But since then, the ground has been shifted from under us and there’s no doubt that the government is stealthily aiming to reduce the number of homes to rent, while boosting the number of owner-occupiers.
Alongside this, the law reforms will bring more costs and hand more power to tenants which will also hit confidence in the sector.
I have no truck with criminal landlords, they should not be operating, and tenants should be reporting them whenever they can, but the truth is the level of demand, particularly from those tenants in England who can’t prove they have a right to be here, is very strong. And that’s not going anywhere anytime soon.
But it’s this issue of getting back the property when someone is not paying rent, or when they are being a pain to neighbours.
The government has already said Section 21 will be abolished and will be replaced by some other legal setup. I doubt it’s going to be as effective.
And this week we see in Wales that the eviction notice has, at the stroke of a pen, been extended from two months to an incredible six months.
But, as the story on Property118 about the new rent laws in Wales makes clear, it’s likely that the eviction process will take closer to 12 months, if not longer.
And as Janet Finch-Saunders, the Shadow Minister for Climate Change, says, there will be no rent being paid during that period while landlords will have the pleasure of tenants playing the system so the eviction process is delayed still further. I hope I am overestimating here, that could be up to 18 or even 24 months to evict a tenant if the courts are overwhelmed with cases.
And then we have the question marks over the energy efficiency rating of property with lenders already trying to push landlords into having a minimum EPC rating of C to get funding.
There’s no doubt that this legislation will be tightened, and landlords will have to invest in double glazing, insulation, more efficient boilers, smart meters and lighting.
One mortgage broker I read in a report recently says this could cost landlords looking to improve a D rating to a C around £6,000. To me, that’s a figure that could be a make-or-break amount for many landlords or, at the very least, put a dent into their profits.
The comments on one of the stories this week on Property118 also makes clear that this work to be undertaken usually means moving the tenants out which will see the landlord having to deal with a void period or having to put tenants up in a hotel for a short time.
We have no end of critics saying that landlords have exploited the property market but there’s a definite shift towards empowering tenants to the detriment of landlords.
On top of this, the Office for National Statistics has reported recently that nearly 40% of tenants are already struggling to pay rent. I’m sure this figure will rise over the winter months as tenants decide to pay energy bills, rather than rent.
So, what can we do?
I have mentioned in this column before about handing out section 21 notices on a given day and highlighted the opportunity of not listing empty properties to gain the attention of the media, the public, our critics, various organisations and, above everyone else, the government.
The only thing I can think of is that every landlord in the country can contact an estate agent to put their homes on the market on an agreed date which will, I’m sure, rattle the government and critics alike when faced with the prospect of rental homes being sold and removed from the PRS.
Having said that, I think the government would only see the CGT register going ‘kerching’ to leave them licking their lips and even encouraging such a move!
Or, I could just sit this one out. There are lots of landlords who weather the storms, take the flak and deal with the nonsense from councils.
But I’m not sure that’s what landlords should do because, possibly for the first time, we can’t look to the future and say that everything is going to be OK.
There are so many issues affecting landlords that if I shut up, I can’t complain when things turn sour. And if I sell up, I get hit with CGT and tenants have nowhere to live.
Are we as landlords really damned if we do, and damned if we don’t sell?
Until next time,
The Landlord Crusader