With Brexit now taking a back seat, private rental prices are rising, and demand is expected to continue to grow as the economy strengthens. Reports are predicting a rise of 10% in rental prices by 2024, with house prices forecast to rise by an average of 15.3% over the next five years.
Though the buy-to-let market is now picking up pace, U.K. landlords have had to grapple with a number of changes to the sector over the last few years. Tax increases, tougher mortgage rules and government reform have squeezed landlords’ profits and generally made buy-to-let a bit of a headache. In retaliation, landlords have turned to tax-efficient structures, short-term letting through sites like Airbnb, and a quarter are even considering leaving the sector altogether.
With that in mind, we surveyed over 100 landlords to ask some important questions: What are landlords’ top concerns? Are landlords up to date with ever-changing legislation? And how are landlords managing and maintaining privately rented accommodation in the current market? Here are their answers, along with our advice on how to maximise your success in buy-to-let.
Overall, tax and legislative changes are the biggest concern among UK landlords, with 58% of surveyed landlords deeming it one of their main concerns:
With that in mind, here’s a complete list of the new legislation coming into effect in 2020, related to UK landlords:
- MARCH 2020 - Extension of Homes (Fitness for Human Habitation) Act
43% of landlords who we surveyed said they are unaware of the Homes (Fitness for Human Habitation) Act 2018. Our survey also showed that 27% of landlords have heard of the legislation but they aren’t sure what it is - so we are happy to clear this up.
The Homes Act was put in place to ensure rental properties are safe for habitation and free from health hazards. This includes problems with damp and mould growth, water supply, carbon monoxide, fire and fire safety and falls associated with bath, shower, and stairs. Under the act, landlords can be forced to improve their rental properties if they don’t meet certain standards. Tenants who signed rental contracts on or after 20 March 2019 were able to use the act right away; as of 20 March 2020, the rules apply to all existing periodic tenancies.
For landlords who maintain their properties well and keep them ‘fit for human habitation’ – which is the majority of landlords – you will have no new obligations so don’t need to worry.
- APRIL 2020 - Minimum Energy Efficiency Standards
New laws came into place in 2018 that ensured all rental properties (unless exempted) must have a minimum energy efficiency rating of an E or above. This legislation is being extended to cover all existing tenancies from April 2020.
Get in contact if you’d like us to help you assess the potential impact of this new legislation, arrange for an EPC assessment, or if you need any maintenance work.
- APRIL 2020 - Client Money Protection Scheme Changes
In April 2019, new rules stated that all letting agents in England are required by law to belong to an approved client money protection scheme to protect landlord and tenant money. Letting agents were given a ‘grace period’ of 12 months to set this up, which will end in April 2020.
- JUNE 2020 - Extension of Tenant Fees Act
The Tenant Fees Act came into force in England in June 2019, but it will extend to cover all existing tenancies in June 2020. The legislation banned most ‘tenant fees’ in new tenancies, meaning landlords and letting agents can no longer charge additional fees other than rent, deposits, holding deposits and charges for defaulting on the contract. Landlords can face fines of up to £5,000 for breaking this law, and £30,000 for subsequent breaches.
Further legislative changes on the horizon
Of course, there are further rules set to be introduced in 2020 that have no official date yet, including Section 21 changes and electrical safety checks. For a complete guide to all the new legislation and rules coming into effect or being speculated on, read our blog post: 15 things landlords need to know in 2020.
Property maintenance is another main concern for landlords
Property maintenance was the second biggest worry among landlords after tax and legislative changes, with over a third (31%) stating it’s one of their biggest concerns. Tenant behaviour and property damage is the third major concern at 27%. However, despite this being a common concern, 14% of those surveyed don’t have landlord insurance and, interestingly, 14% said they aren’t sure if they do.
At Portico, we go to great lengths to make sure we only approve the best tenants, and also take steps to protect our landlords and their properties:
- Take a security deposit
- Screen tenants
- Set out a detailed tenancy agreement
- Build healthy relationships with tenants
The impact of Brexit & void periods
Brexit and market conditions have been at the forefront of many property professionals’ minds since the EU Referendum, but fewer landlords appear to be as worried about it now with only 19% and 18% naming either a big concern. This could be down to the market having stabilised since the general election results in what has been coined the “Boris bounce”.
We’ve recently posted about the impact of Brexit on the housing market. Read about our forecast for the property market after Brexit, which includes information on the rental market, rents and rental yields.
Void periods were the sixth biggest concern for UK landlords with 15% of the votes. With an increasing number of landlords utilising short-term rentals to maximise revenue in between long-term tenancies, this may be why void periods are becoming less of a worry.
Find out more about our Airbnb management services in London, Liverpool and Manchester, or find out how much you can earn on Airbnb in 60 seconds by clicking here.
Related: The Booming Liverpool Airbnb Market: Statistics and Predictions
How much should landlords budget for maintenance and renovations each year?
Our survey showed that property maintenance issues are the second biggest concern among UK landlords, so it’s important to have a budget when it comes to property maintenance. But what should that number be?
According to our survey, the majority of landlords (54%) dealt with one to three maintenance issues in 2019, while 26% of landlords dealt with four to five issues. Of those surveyed, 44% of landlords budget £1k to £2k for general maintenance costs per property each year. Interestingly, research from LV suggests that a good figure for looking after a rental property is £3,134 a year per property.
How many maintenance issues have you had to deal with this year?
Renovations are another area that needs to be budgeted for when investing in a buy-to-let property. Our survey revealed that 63% of landlords have renovated their rental property since purchasing it, with 38% saying the principal motive for doing so was to improve the property for the tenants. 33% of landlords stated that their motive for renovating was to make the property easier to rent and reduce void periods
For renovations, landlords are spending the most money on decorating (64%), while repairing or replacing white goods (39%) and repairing or replacing the boiler (35%) are the next most common areas to spend money on for renovations.
Another interesting point that our survey highlighted was that a quarter of landlords stated they aren’t sure what repairs to a rental property are tax deductible. As there have been many changes to tax for landlords and what can be deducted from rental income in the last few years, it is no doubt a confusing topic. Here’s a list of things that are tax deductible:
- Insurance (landlord insurance, buildings and content insurance etc)
- Agency and property management fees
- Services (the services of a gardener, cleaner, exterminator, or handyman can be deducted against income)
- Water rates, council tax and gas and electricity bills (if paid by you as the landlord)
Spending money in order to provide a lasting benefit to your property is considered a capital expense, and these outgoings cannot ordinarily be deducted from rental income. This includes work to improve or enhance the property, or purchasing furnishings and equipment for the property.
Let us give you peace of mind
For landlords worrying about tax and legislative changes, or struggling with property maintenance, a letting agent can help ensure you stay compliant in every aspect related to managing and running a rental property.
Our survey shows 54% of landlords manage their own buy-to-let property, while 43% of landlords use a letting agent to manage their properties, and 3% use an online management service. If you are part of the 54% doing it alone but looking for some help or advice, feel free to give us a call on 0207 099 4000!!!!
You can also get an up-to-get rental or sales valuation on your property in just 60 seconds with property valuation tool.