Rents to rise in 2019?

December 17, 2018

As the year draws to a close, it’s always interesting to dust off the crystal ball and try and look into the future to see what may happen in the private rented sector.

With all the changes that have occurred over the past twelve months, and with more expected in the new year, it’s quite a challenge!

Just about the only thing anyone can predict is that there will continue to be significant upheaval due to economics, politics, and Brexit and we could witness more landlords leaving the market as they lose the appetite to deal with an ever-changing, unpredictable, and volatile sector.

One positive thing that could happen is that rents could start to rise.

David Cox, Chief Executive, ARLA Propertymark says that 65% of letting agents believe rent prices will rise next year, up from 59 per cent when agents were asked the same question last year, looking ahead to 2018.

According to the data, 53% think demand will continue to rise, but 78% think the number of landlords operating in the private rented sector will decline next year, as they are driven out by rising costs. In line with this, 67% expect landlords’ taxes to rise again and some landlords will pass this increase on to tenants, buy raising the rent.

Whilst the rent is set by the market, many landlords have not raised the rent for good tenants over many years, so they have quite a bit of headroom to increase it.

This January is the first time that landlords will feel the true impact of Section 24.  Many of them are unaware of this reduction in being able to claim mortgage interest against tax, and, when they find out through an increased tax bill, they may decide that BTL is no longer financially viable and decide to sell up.

The so-called “dinner party” property investor is disappearing, with the number of landlords falling by 120,000 in less than three years after stamp duty reforms were introduced by George Osborne.

Figures calculated for The Times and released this month show that landlords have sold 45,250 more homes than they have bought so far this year and a total of 119,250 since April 2016, when the former chancellor introduced a 3 per cent stamp duty surcharge on buy-to-let purchases.

Along with landlords leaving the sector, we have Brexit.  This momentous event has put a lot of people into a kind of “limbo” when it comes to making property-based decisions.

This means that many of those people who were thinking of buying a property, have decided to rent instead until things become clearer.

There are also those who have sold their property, but decided to rent because they think prices may decline further, or they do not want to commit to buying another property until the impact of Brexit is fully understood.

Finally, there is a shortage of stock for sale and the sales market has seen a huge decrease in transactional volumes due to brexit uncertainty, meaning that people have less choice of what to buy and may decide to continue to rent until the market picks up or they find a suitable property

David Cox of ARLA said: “The PRS has undergone a tsunami of change over the last few years, and there are difficult times ahead with the tenant fees ban is expected to come into effect next year.

With all the new legislation landlords have faced over the last few years, they have found themselves either being pushed out of the market or forced to pass rising costs on to tenants – a trend which we’ll continue to see next year.

However, looking further ahead we firmly believe that the industry will come out stronger, more professional and better respected at the other side. The best landlords and agents will adapt and survive to the new circumstances, keeping the PRS afloat.”

As with any situation, as well as threats, there will be opportunity for those who ride out the storm and look for the angles that others have missed.

At times like this, professional advice is worth it’s weight in gold and all 85+ Northwood offices around the UK will be on stand-by to assist landlords.  Our offices fully understand the pain landlords are feeling, and will be offering practical support and advice to our landlord clients to help them weather the storm and come out the other side stronger than ever.

There will always be demand for a quality, well managed property in a good area, so landlords should stick to the fundamentals of what makes a good investment, take a long term view, seek professional advice and support, and keep the faith, as, on the other side of a challenge, there is very often enhanced opportunity.

If in any doubt, landlords should not make any rash or knee-jerk decisions until at least the 2nd quarter of 2019, when things should start to become clearer.  Property investment is a very long-term investment and what feels like a roller coaster at the time, when looking back, just looks like speed bumps!

The main thing is to take a pragmatic view by stripping away media rhetoric, stay engaged with your agent and the sector as a whole and that will guide you forwards through the year ahead.

Your local Northwood agent is always ready to support and advise.

Seasons greetings to all our landlords and tenants!

Northwood is one of the largest and most recognised estate agents in the U.K. and the leading supplier of Guaranteed Rent to give landlords complete peace of mind.

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