With the good news continuing for landlords on the economic front; the Help to Buy scheme, easier mortgage approvals still at reasonable rates, rents steady and good tenant demand, buy to let has had a very good year so far in 2013.
Investing in property with yields well above alternative and more risky investment asset classes has been a relatively safe bet for many and has been persuading more and more people who would never have considered it before to enter the market.
It would be unfortunate then if something came along to spoil the party; but there are ominous signs of storm clouds gathering on the horizon.
Indications of possible future policy emanating from this week’s Labour Party Conference show that any future Labour Government would be much more prepared to interfere with market forces and impose price caps and much more aggressive regulation.
Banks, Energy Companies, and Building Firms, along with big corporations in general, would be in the firing line, and it is now clear that so would housing, and the private rented sector in particular.
There is more and more talk of rent control and Hilary Benn stated at a housing fringe meeting this week that there would be a national register of all letting agents and private landlords if Labour are elected next time.
Whether they would go the whole hog and take us back to the Rent Act days is debatable, and truly unthinkable, but any talk of price capping and rent control will make suppliers in any market jittery about putting more money at risk. See our comment article in this issue and also this in-depth analysis article on Rent Control
Another worry which could affect landlord borrowers in the coming months is the sudden announcements of a rise in mortgage rates by selective lenders. We had the scare late last year when the Bank of Ireland suddenly raised its rates, and now the West Bromwich Building Society is doing the same thing. See the full story
Landlords are complaining bitterly about the move by the West Bromwich to hike buy to let mortgages by 2% from December 1 for borrowers on buy to let trackers. Many of the buy to let mortgages specify a rate of 0.99% above Bank of England base – which means landlords are currently paying and interest rate of 1.49%.
The rate increase affects around 6700 borrowers who took out loans with the now defunct West Bromwich Mortgage Company. Recently, Bank of Ireland raised rates on buy to let mortgages for more than 13,000 customers, but backed down after protests in just over 1,200 cases.
Paragon Mortgages is offering landlords six two-year fixed buy to let mortgage rates starting at an interest rate of 4.5% and up to 75% loan to value (LTV).
Some student landlords could come under more pressure with the steady increase in the provision of high end and new student accommodation by big corporate investors. The Unite Group PLC is the largest provider of student accommodation in the UK offering some 42,000 rooms in 23 locations and has ambitious plans to provide many more.
According to a recent This Is Money report there are around 1.4 million fulltime students in the UK and only 150,000 who stay at home. The rest need somewhere to live when they attend colleges throughout the UK.
British universities must guarantee student accommodation to all first-year home and overseas students, now totalling around 600,000. However, the universities themselves are only able to accommodate just about half that number, so all the rest are forced to find their own accommodation, most with small private landlords.
Corporate specialist landlords like Unite house around 180,000 students every year. That leaves around 100,000 undergraduates scrabbling for accommodation, many ending up in rather squalid bed sits which are often too far from their campus.
Unite sees a gap in the market and aims to fill it by providing suitably located high standard accommodation for its student tenants. Its properties are newly built blocks, clean, modern and well maintained, with all the modern faculties students crave: wi-fi, broadband, laundry facilities, en suite showers, communal meeting places and even games rooms and gyms. See the full story here
Despite these possible threats, there are still lots of opportunities for private landlords who research the market and manage their properties to a professional standard. With private renting now approaching one-fifth of the British residential property market, must of this accommodation supplied by small private investors, landlords are becoming a force to be reckoned with.
One way to influence policy, at a time when it seems this is more important than ever, is to join one of the main UK landlord associations. They have the resources and member backing in numbers to really influence political thinking on behalf of landlords.
Comments to: editor@landlordZONE.co.uk