It’s all Over for the Private Rental Sector…

I want to share with you a telephone conversation that I recently had with a landlord who has a portfolio of five properties; three in Derby City centre and two in the surrounding suburbs.

He wasn’t a landlord for whom we provide a management service, however, he had used us in the past to find his tenants.

“It’s over” he said. “Buy-to-let is over”.

“What do you mean?” I replied

He carried on. “It’s well and truly over. I can’t do it any more. It’s changing all the time and I can’t make any money out of it. I’m selling up. Can you put my properties on the market?”

I thought for a minute and then replied. “I totally agree with you” I said.

Silence.

I continued, “It’s OVERCOMPLICATED, OVERSUBSCRIBED and OVERREACTIVE and unless landlords and letting agents work with each other to OVERCOME the obstacles in our way, then the Private Rental Sector has a very big problem.

I’ll explain what I mean and what I said to this landlord when we met up a couple of days later.

OVERCOMPLICATED

There are now well over 125 pieces of major legislation that have to be adhered to when letting and managing a rental property. There have been many recent updates of previously introduced bills and regulations, however, there has also been a raft of new legislation  introduced within the last decade.

Do you know what they are?

How on earth does a private landlord know everything that he or she needs to before even thinking about implementing it all?

Then, we have…

OVERSUBSCRIBED

And that is exactly what the private rental sector is. There are too many tenants and not enough properties and this is going to get worse.

Let’s look at the areas that we primarily cover, Derby and Burton. Based on the current numbers of individuals who are living in rented properties together with the government forecasts of population growth, we will need around 10000 more rental properties in the Derby and Burton area by 2027. That’s 9 years. Over 1000 new rental properties a year. (Read my colleague Simon Joyce’s blog post in full HERE)

Looking at the basic rules of supply and demand; If demand for something increases and the supply decreases, inevitably the price, or in this case, rents, go up – notwithstanding any rent caps that the Government may introduce in the future!

That brings me to…

OVERREACTIVE

The Government’s strategic solution to regulate the lettings industry, to combat ‘rogue agents’ and ‘rogue landlords’, to stop agents charging hidden fees and to ‘protect’ tenants is… reform landlord taxation, up the stamp duty percentages for buy to let properties and ban fees that agents charged to tenants.

A great incentive for landlords to stay in the rental sector and provide the supply of rental properties necessary to meet demand don’t you think?

Agents are set to lose a large proportion of their current income when the tenant fee ban is introduced and one of the most popular ways being muted by agents to offset the loss of this income is to get rid of staff. Cutting staff numbers will mean compromising on service and losing sight and implementation of the 125 pieces of legislation that must be followed. Corners will be cut and landlords will become more vulnerable.

So, what can be done?

OVERCOMING THE OBSTACLES

When the going gets tough… there are always opportunities that present themselves.

The positives from a landlords perspective are that, in my opinion, rents will go up. The strongest agents must improve as other agents leave the market.  The best properties  continue to attract the best tenants. We have to ensure that the solutions, the strategies and the knowledge that we have can still make property a great investment.

Remember, whatever happens and whatever changes have to be made, the age old rules of property investment will still apply: The right properties in the right areas at the right price with the right specification to suit a specific demographic will still produce excellent rental returns and potential capital growth.

There are lots of ways open for landlords to improve their returns and profitability which is why we are running a LANDLORD SEMINAR on 12th September at Mickleover Golf Club to discuss how we can tackle these obstacles being placed before us. Visit our LANDLORD SEMINAR website.

So, do I think property investment is OVER?

No. I certainly don’t… I think that the opportunities are just beginning.