3 Major Trends In The Buy To Let Market
As mortgage advisors, we’re constantly providing advice to buy to let landlords and the trends that we’re noticing. 2019 will see a lot of changes in the lettings industry so we’ve put this guide together in anticipation of what it means for landlords.
1. Rental increases.
The ban on letting agent fees is set to take place on June 2019. As a result, letting agents will no longer be able to charge tenant fees for applications/starting a tenancy, renewal fees or end of tenancy fees. As the administration has increased in letting a property over a recent years, such as how to rent guides, deposit protection and right to rent checks for example, many agents have remained at the same level of management fees. Furthermore, the banning of tenant fees will cause agencies to revaluate their landlord fee scale.
The general consensus is that landlords will absorb the additional costs that letting agencies will incur as a result of the ban. Many letting agents will look to landlords in replacing the income from application fees, renewals and end of tenancy fees. It’s quite an easy solution for landlords to simply increase the rental price as a result. Tenants will also no longer have additional fees to pay, so there should be surplus capital to pay for the increased rental prices. It seems a pretty long winded way to go about things, but an increase in rental prices seems inevitable.
2. Private landlords
There are many landlords that don’t use letting agencies, as they have the time, expertise and resources to manage everything themselves. Tenants that don’t wish to pay fees or go through rigorous checks might search for private landlords online. Tenants don’t pay fees, landlords don’t pay agents, it’s surely a win-win.
As a result of the tenant fee ban, tenants will no longer have an incentive to avoid letting agencies. The only incentive will be for tenants who won’t pass referencing/credit checks. This isn’t good news for landlords that tend not to use letting agents, as they may be left with the ‘bad apples’. Furthermore, there are changes set to take place where private landlords will be required to join a redress scheme, such as the property ombudsman. Many landlords will simply have no choice but to use the services of letting agencies, in order to find good tenants and stay up to date with legislation.
3. HMO vs Single Residential
The past several years has seen a huge influx in landlords entering the HMO market. Although this has been an increasing trend, it seems to have slowed down. This is perhaps because the supply of rooms is currently outweighing the demand for them. On paper, an HMO looks like a great prospect and often enough it can be. But what happens when the supply outweighs the demand? A lot of landlords are left with empty rooms which can prove costly, especially as landlords are including bills as part of the package.
It seems as though the HMO trend has slowed down and more landlords are sticking to standard residential buy to let. Void periods are less frequent and can landlords can maintain the same tenant in the property for a number of years.
Although lenders have introduced a lot of financial products for HMO mortgages, it’s still a very small sector when compared with the traditional buy to let.
Author; Martin Alexander
Expert Mortgage Advisor, the mortgage information website.
Date; 14th of March 2019