The first six months of 2020 have been challenging for all of us and landlords are no exception, with 8 in 10 saying they have been negatively impacted by the Coronavirus pandemic.
We are feeling that market forces are working against us, with low chances of capital appreciation in the foreseeable future. Moreover, there is increasing regulation, more protection for tenants, and higher outgoings as we implement energy efficiency measures and the necessary remedial works following mandatory electrical inspection condition reports.
This is largely down to unpaid rent, which is not surprising when you consider that renters have fewer savings and no ability to take rental payment holidays without impacting their future outgoings in the short term.
The knock-on effect to landlords has been huge, especially those who rely on their rental income to live. The hardest hit are those who had vacant properties at the start of lockdown; those with existing possession cases for rent arrears and those who were looking to sell-up.
While restrictions on home moves have now been lifted, the recent extension to the ban on evicting renters is further bad news for some landlords, as could be the prospect of localised lockdowns. On top of this, landlords are having to deal with increased legislation, which often means higher costs and more red tape.
Since April 1st 2020, all rental properties (including existing tenancies) have required an Energy Performance rating of E or higher and new Electrical Safety Standards have been applied to all new tenancies from 1st July 2020. In addition, the Tenant Fee Ban roll-out was completed on 1st June 2020 and now applies to all tenancies.
Like any other industry, there will be winners and losers in the buy-to-let sector as the rest of 2020 unfolds. Some landlords will not recover from their cash flow crisis and look to sell up. Others will continue with a pre-planned exit strategy but in a less favourable sales market than initially thought. Many more landlords may start to consider tenants on Universal Credit as they look for some kind of rent guarantee whilst there have been additional discretionary payments available for tenants who have fallen in to arrears.
There is good news, though. Since the lockdown was lifted, we are noticing demand for rental properties has increased generally – from existing tenants who were already considering a move, as well as those who now want properties with outside space or home offices, buyers whose purchase has fallen through and people now deterred from purchasing because of job uncertainty.
Sadly, some homeowners will be forced into the rental market as they sell for a quick cash injection. And while house prices are predicted to fall, rents have actually risen despite the pandemic and are likely to remain resilient.
There could even be great opportunities for portfolio growth, with new buy-to-let mortgage products already being launched. While the last few months have been a struggle for many landlords, the market is already showing signs of a healthy bounce-back for those who have the nerve to hold on.