BUSINESS

What will 2019 have in store for landlords?


It was another shaky year for the private rented sector as landlords continued to adjust to a barrage of ongoing tax and regulatory changes. 

2018 saw the first drop in the number of homes available to rent in 18 years as the effects of adjustments to stamp duty and mortgage interest tax relief began to force landlords out of the market. 

It wasn’t all doom and gloom, as tough new licensing rules designed to tackle slum landlords and legislative changes to prevent retaliatory evictions were both introduced, spelling good news for tenants.

And landlords have been able to enjoy low mortgage rates as lenders try harder and harder to stop customers from leaving their books. 

As for this year, 2019 promises no end to the regulatory upheaval. We asked the experts to spell out what landlords will need to know in the coming year.  

The Government is currently looking at making minimum three-year tenancies mandatory

The Government is currently looking at making minimum three-year tenancies mandatory

Andrew Turner, chief executive at buy-to-let mortgage broker Commercial Trust, explains what regulatory changes landlords can expect to see in the coming year. 

The Tenant Fees Bill  

Andrew Turner says: Plenty has already been discussed concerning the Tenant Fees Bill, which is likely to become law in the spring of 2019.

The Bill seeks to remove letting agent charges to tenants, which some have deemed excessive and unfair. 

These changes could have a number of potential outcomes for landlords. For example, letting agents could increase charges for other services. 

Andrew Turner, chief executive at buy-to-let mortgage broker Commercial Trust

Andrew Turner, chief executive at buy-to-let mortgage broker Commercial Trust

Andrew Turner, chief executive at buy-to-let mortgage broker Commercial Trust

If it becomes more expensive to use an agent, landlords may consequently have no option but to pass on the added costs, resulting in rent increases for tenants.

Alternatively, landlords may choose to cut out the cost of a letting agent completely and self-manage their properties.

This might become a problem for landlords investing in areas outside of where they live, who may have relied on agents on the simple basis of logistics.

For example, the North West has seen significant investment from landlords from outside the region seeking better yields.

If letting agent fees increase and landlords opt to self-manage, it could stem this trend, as being in reach of your property investments makes more sense.   

The Tenant Fees Bill will cap how much tenants will have to pay for damage deposits 

The Tenant Fees Bill will cap how much tenants will have to pay for damage deposits 

The Tenant Fees Bill will cap how much tenants will have to pay for damage deposits 

The other main aspect of the Tenant Fees Bill is a cap on how much tenants should pay for damage deposits at the start of a tenancy. 

This month the Government announced it would go ahead with a five-week limit on tenancy deposits, where the annual rent does not exceed £50,000.

On top of this politicians are reviewing the practice of ‘default fees’, where tenants are charged for minor indiscretions on their tenancy agreement.    

2019 is sure to see a lot more clarity around these evolving issues.

Client Money Protection

From April 2019, all property agents must register with an approved client money protection scheme, or CMPS.

This should provide landlords and tenants with greater peace of mind that their money has been properly secured.

A CMPS protects landlord or tenant money, if a letting or property agent goes into administration. Money might relate to a tenancy deposit, rent or funds set aside for property maintenance. 

Any agent failing to join a CMPS will face a penalty of up to £30,000 for non-compliance.

Changes to how agents handle client money will add an extra layer of protection for landlords

Changes to how agents handle client money will add an extra layer of protection for landlords

Changes to how agents handle client money will add an extra layer of protection for landlords

Dispute resolution

Ombudsman Services withdrew from the property and housing sector in August this year, and the Government is now looking to introduce a new redress system for disputes.

In November it launched a consultation on a new housing court. The intention is that the creation of a housing court would provide a single path of redress for landlords and tenants.

Rent controls for London landlords? 

David Smith, policy director at the RLA 

David Smith, policy director at the RLA 

David Smith, policy director at the RLA 

London landlords may be short on festive cheer this year as rumours circulate that Sadiq Khan is looking to bring in rent controls in the capital. 

David Smith, policy director for the Residential Landlords Association said:

‘It is curious that the Mayor is considering introducing rent controls at a time when rents in London are falling according to official data. 

‘All evidence around the world shows that where forms of rent control are in place, decoupling prices from the value of properties hurts both tenants and landlords. 

‘In the end what is needed is a relentless focus on boosting the supply of housing.’  

The consultation runs until January 22nd, 2019. We are likely to hear a lot more about this concept over the coming months.  

Longer tenancy agreements

The last thing to consider is the prospect of longer tenancy agreements.   

2019 should finally see a Government decision on whether to introduce minimum three-year tenancy agreements.

The Government argues this will offer greater security to families renting property. 

Next year looks likely to be another where landlords will need to adjust. 

Whether that is their investment strategy, financing or daily management of properties, it is imperative that they keep abreast of all changes and how they will be affected. 

What’s going to happen to buy-to-let mortgage rates?

Will Kirkman, of This is Money, says: Throughout 2018, landlords have experienced some of the lowest mortgage rates in memory, despite the Bank of England putting up the base rate to 0.75 per cent.  

Five-year fixes in particular have grown in popularity since the Bank of England brought in stricter rental income rules for two-year fixes.

The average five-year fixed buy-to-let rate fell to its lowest level in October this year to 3.40 per cent, but since then it has gradually risen to 3.54 per cent. 

Lenders are now even offering cheap 10-year fixes for landlords looking to lock in for a decade. 

Buy-to-let rates comparison  
BTL 2 Year Fixed, All LTVs 5 Year Fixed, All LTVs 2 Year Tracker
01/12/2013 4.1% 4.72% 2.87%
01/12/2016 3.01% 3.74% 1.98%
01/12/2018 3.06% 3.54% 2.13%

However, low rates won’t last forever and next year it is likely that rates will begin to rise again.  

Moneyfacts’ Rachel Springall said: ‘It is largely expected that interest rates will rise in the near future, largely down to economic uncertainties. 

‘If house prices were to fall, this could also impact landlords. As a combination, this could make it more expensive for landlords, so they will need to keep a close eye on their income and make sure they at least have a good mortgage deal to brave the storm.

‘Not only this, but if a fall in rental demand dents the buy-to-let market, then we could see landlords have their money squeezed and could even turn to cutting their losses and selling off any properties in difficult times.’



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