Stuart Law, a prominent figure in property investment has warned of challenges facing the housing market – with the buy to let sector suffering the most.
And the recent autumn statement only confirmed there are bleak times ahead for landlords and lettings agents.
Although the chancellor of the exchequer, Jeremy Hunt, confirmed the stamp duty cuts would continue until March 2025, the overall outlook is grim.
Cutting capital gains allowances from £12,300 to £6,000, starting from next April and then dropping to £3,000 from April 2024, was a major blow to the buy to let market.
Stuart Law, the chief executive of the Assetz Group of property lending and investment companies, said: “The biggest challenges by far face buy to let landlords who are seeing asset values decline, while the costs of a buy to let mortgage continue to rise, along with property running costs.
“This compounds the financial issues buy to let landlords have been struggling with for years, and we will likely see more come out of the sector, reducing rental stock and driving up rents for people already facing financial hardship.”
How Landlords can win
Everyone’s being hit hard by the cost-of-living crisis right now. And, everyone’s a lot more cost-conscious.
Therefore, landlords must do whatever they can to justify the highest market rents possible. One of the best ways to do this is by making sure your property is furnished and decorated as best as you can afford.
If possible, keep the tenancy periodic too, so you have greater flexibility and can respond to market changes accordingly. You might face resistance to this from lettings agents who like to secure a fixed income for 12 or 24 months but it’s worth putting your foot down if you can.
More so than ever property compliance is paramount. Make sure the property is let compliantly and cover all obligations. Be stricter than you might normally be. Thoroughly reference new tenants and ensure they have the right to rent before accepting them.
Perhaps most importantly, if you don’t already have rent protection insurance, get it. Even the most reliable tenants can fall on hard times, especially during a recession, and you could be left high and dry if they can’t pay their rent.
How lettings agents can triumph
Just as landlords need to protect their investments at all costs, lettings agents must use every possible means to shield their managed property income.
New landlords are going to be in short supply over the next couple of years and some existing landlords may decide to sell up and get out of the game. So, unless you’re lucky enough to acquire new portfolios, net growth will be challenging.
Focus on keeping your existing landlords happy. Do what you can to go above and beyond for them. Perform thorough reference checks and help landlords remain compliant.
Of course, all of this takes time and can’t be done on a shoestring budget. One of the best things you can do right now is to look for ways to enhance your operational efficiency. For example, investing in property software that helps you automate day-to-day activities can help free up hours that can be put to better use.
This market will certainly separate the wheat from the chaff, but those who rise to the challenge will eventually see the fruits of their labour.
A tale of two sides
While many investors will choose to sit tight throughout this storm and wait for the sun to break through the clouds, others will see this as the time to act. For these cash-rich investors, this is the perfect time to invest and grow their portfolios. It’s a tale of two sides.
As we look to the future and prepare ourselves, we must remember that people will always need to move, whether it’s to start a new job or start a family, upgrade or downsize. Marriage. Divorce. Births and deaths. The whole gamut of the human experience.
So, although volumes will slow down over the coming months to get through the winter, be patient. They’ll pick up again. They always do.