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23 Days Later

23 Days Later
Well here we are 23 days after the General Election confounded the pollsters. But what immediate effect has the result had on the lettings market, and what effect is it likely to have in the coming years?

Firstly, most landlords (and their letting agents) were able to breathe a collective sigh of relief as the anti-landlord, anti-enterprise (and, ultimately, anti-tenant) threats by the opposition parties evaporated overnight - in England at least. With successive Governments having allowed the social housing sector to stagnate, with insufficient new housing being built, would-be first time buyers not being readily able to get onto the ownership ladder, etc., the housing problem in the UK is very firmly being mitigated by the growing army of private landlords. It behoves any Government, therefore, to keep this army well fed and motivated and, thankfully, the present one understands this. As a first step towards maintaining continuity, Brandon Lewis, the MP for Great Yarmouth, was reappointed in the role of Housing Minister.

So, sigh of relief over, what does the immediate future hold? We've already seen, in the short space of time since the election, a pick-up in interest in the overall housing market for sales together with a resurgence in tenant demand. It's amazing what a bit of confidence can do! The Government have a big job on their hands meeting their new house build targets and while their 'Help to Buy' scheme will help some to buy, they are going to be a long way off adjusting the rising tide of tenant occupation. And, what they really mustn't forget - a large slice of the near 20% of the adult population now living in rented accommodation do so by choice, not circumstance. Accordingly, it is most unlikely for some years to come that we will see anything but a growing demand by tenants for good quality rental properties. Now we have a measure of political and economic certainty, investors will be confident to make use of the recent Pension Reforms. These are expected to unleash liquidity into the housing market, much of which will be invested in Buy To Let Properties.

What happens when investors rather than First Time Buyers are buying the houses and flats which the FTB's would previously have aspired to? The answer is Property Prices at the entry level will increase (with a push through to the rest of the market) and would-be buyers will be retained as tenants for longer. It is something of an anachronism that BTL mortgages are easier and more attractive to obtain currently than FTB mortgages; even with Help To Buy, tenants are still finding it difficult to get onto the ownership ladder. Simple economics would suggest that over time, if the supply of BTL property keeps rising, eventually there will not be enough tenant demand to fill them all. However, this doesn't account for the big increase in population that is expected over the coming years and, in practice, therefore, there will be new tenants coming into the lettings market to more than offset this.

Of course, it is impossible to predict the future but all the indicators do point to a rosy outlook for the lettings industry and the property market in general. Care will need to be taken by the powers that be on two fronts; firstly, as continued growth in the economy requires interest rates to rise, this is done very carefully so as not to choke off the housing market. Conversely, steady growth has to be the order of the day, the last thing we need in this country is another unsustainable housing boom.

As far as I can see, these are the only major impediments to a good future for landlords. There is likely to be (and should be) some minor Government intervention in the Private Rented Sector. For example, the very small minority of rogue landlords and rogue agents in England continue to act as a drag on the sector and while there is plenty of existing legislation available to control them, it does need better enforcement. A good way would be to introduce the formal regulation of the lettings industry and refine all of the voluntary (and often competing) regulatory bodies into one entity. Really, is there a need for four voluntary bodies, all without the compulsion to join any, three ombudsmen, and four deposit schemes? No wonder those wanting to play fast and loose always seem to be able to do so with impunity. Another example of where Government will intervene is in the energy efficiency of our housing stock in this country. Much has been done already but as the already ageing housing stock gets even older and it's efficiency declines further, more improvements will need to be made.

If you've interpreted this as a green light to either become a first time investor or increase an existing portfolio, please just take a note of caution. The world of property has always been an interesting and potentially profitable place to be but it can be a shark infested pool for the unwary. Before you dip your toe in the water, make sure you gather as much information as you can and seek the advice of a lettings specialist before making any decisions. A good place to start is with a registered SAFE AGENT and as the founding member of the scheme in Norwich, Martin & Co will be very pleased to provide you with independent peace of mind.

 

Mike White

Martin & Co Norwich

01603 766860

29th May 2015