January Newsletter - What can we expect from the property market this year?

It's the start of a New Year with Greenstone, and we've plenty for you to get your teeth into in this first newsletter of 2020, including a look at what we can expect from this year's property market.

You'll also find a selection of local events below, alongside at why the Buy-to-Let market is a great option for investors. Finally, we look at what the abolition of Section 21 could mean for vendors and renters alike and if you're looking to become a landlord, why not read our guide on what you need to consider?

Wishing you a prosperous 2020!

Best regards

Lewis Green, Director

Section 21 abolition to be completed this year

2019 was filled with talks of abolishing Section 21 “no fault” evictions. The Government initially announced the abolition in April 2019, which was followed by a consultation process from July to October 2019. With the political uncertainty throughout the year that has recently settled, the Queens speech has confirmed that the abolition proposal is still intended as we move forward into the new year.

What exactly is a Section 21 eviction?
Included in the Housing Act 1988, Section 21 is the recovery of possession on expiry or termination of assured short hold tenancy. This essentially allows landlords to evict tenants from their properties with two months’ notice, without any reason given.

Why is this being abolished?
The ability that landlords have to evict any tenants without reason has been argued to have negative effects on tenants’ well-being and cause huge disruption to their lives. This can disrupt the lives of good tenants who may have done nothing wrong in relation to their tenancy agreement. It can also be extremely unsettling families who may have children settled in local schools and communities.

What impact will the abolition have for tenants?
The abolition of section 21 of the Housing Act 1988 will provide some protection for tenants by assuring them that their tenancy agreements will be upheld for the duration of their contracts. This is providing that they do not breach this. The abolition is a positive step for tenants; especially families who are renting on a long-term basis as it reassures them that their housing requirements are met allowing families to settle.

What impact will the abolition have for landlords?
It could leave landlords vulnerable to tenants who may abuse their home, leaving them with less power to regain possession of their property and making this process longer. Without an updated alternative provision to support landlords to protect their property, it could deter them from offering their property on the rental market. This could contribute to further demand for rental property, but with a reducing supply; driving rental asking prices to increase. To address this, the Government has proposed to strengthen Section 8 of the Act, which allows eviction due to the tenancy agreement being broken. This would ensure that the landlords needs are also protected with effective channels for them to use in the event of undesirable circumstances.

The Policy Director for the Residential Landlords Associations explained that it is crucial to also reform the way repossessions take place to avoid a rental crisis. A new system is required for landlords as well as tenants so that it is fair market for all. There must continue to be a lawful procedure to protect landlords in legitimate circumstances such as anti -social behavior, and tenant rent arrears.

What can we expect from the property market this year?

Now that 2019 is over, it is time to look to the year ahead and what is expected to be a strong year for property. Now that there is a majority government and uncertainty around Brexit seems to be assuaged, the outlook for 2020 is strong – read on to see what’s in store.

2019 proved to be a year of resilience for the property market, with prices maintaining steady growth, and a resurgence in the first-time buyer market evident for all to see.

The first key factor in property and the wider general economy for 2020 is, of course, Brexit. With the Prime Minister’s Brexit deal now passed by MPs, the UK is due to leave the EU at the end of the month with a withdrawal agreement – effectively meaning there will be a transition period as the UK truly cuts its European ties until 31st December this year. For property, this means additional certainty – with a majority government and a conclusion to the Brexit saga, buyers and sellers who have been hesitant to enter the market are predicted to jump in, creating something of a surge.

Kate Faulkner, housing expert and founder of propertychecklists.co.uk, says: ‘One of the things that has held the market back over the last 12 months is the uncertainty of Brexit and latterly the election.

‘Now both of these questions are settled and as people have ‘hung on’ for some time, it is likely there will be a bit of a Brexit bounce in activity at the start of 2020. As a result, I would expect more people to put properties up for sale and more buyers coming into the market. In some areas this may result in a short term rise in prices as people compete for quality properties in good locations which are likely to still remain in short supply.’

Widely predicted to be announced next month, the government’s Budget statement will have a steer on the property market for both sales and lettings. We have already had an idea of what is in store thanks to the Queen’s speech in which there were allusions to a stamp duty surcharge to overseas buyers, first-time buyer incentives and further lettings legislation reforms. With the Budget predicted to be announced in February, this could be a catalyst to further spring activity in the property market.

In terms of the lettings market, 2019 proved to be a key year with new legislation introduced, most notably the Tenant Fee Act. Throughout last year we saw the demand for rental properties growing, however the supply being somewhat limited which presented landlords with the ideal opportunity, as long as they are adhere to the new legislation.

David Cox, chief executive of ARLA Propertymark, said “Looking ahead to 2020, we hope the Government recognises the importance of increasing supply for tenants and uses it as an opportunity to make the market more attractive for landlords. This will encourage more landlords back into the market as well as ensure that tenants, including those who are most vulnerable, are not at a disadvantage in being able to find a suitable and affordable home to rent.”

Another key player in the health of the property market this year will be mortgage rates – in 2019 we saw record levels of first-time buyer mortgages thanks to a greater selection of available mortgages and rife competition amongst lenders. If we see these favourable rates continue this year, then the first-time buyer sector can be expected to endure and potentially even grow thanks to the forecast influx of available properties, providing more choice.

Overall, 2020 is set to be a more fruitful year for property thanks to the greater levels of political stability and the continuing favourable mortgage rates and saving schemes.

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HALF HITCH are putting on fun, bespoke gin-making classes at their very own micro-distillery in Camden Market.

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Ilan Volkov conducts the BBC Symphony Orchestra @ Maida Vale

Join the BBC Symphony Orchestra at Maida Vale Studios for a concert to be recorded for future broadcast in BBC Radio 3’s The New Music Show.

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Why the Buy-to-Let market is still viable for investors

With average rents rising across the United Kingdom, and rife competition in the mortgage sector creating attractive buy-to-let rates, it is evident that the public rental sector still has plenty of life left in it for both would-be and portfolio landlords.

Recent analysis from HomeLet has shown that average rents across the UK have increased by 3.2% - outstripping the increases in house prices throughout 2019 and showing that there are still strong returns available for savvy landlords. Excluding London, the average rent stands at £784 pcm – with the average rent in the capital city double that at £1,665pcm.

David Alexander, joint managing director of apropos, said: “There is still money to be made in the private rented sector and being a landlord can provide a reasonable income and a healthy pension. But landlords need to be more savvy to make it work and much more pro-active than in the past.”

“You must ensure your finances are arranged as efficiently as possible, that your costs are reduced to the minimum, and that your margins are as good as they can be.”

HomeLet data has shown rents increases across the whole of the United Kingdom, with Wales leading the way;

Region	Nov-19	Nov-18	Annual Variation
Wales	£630	£599	5.2%
Yorkshire & Humberside	£652	£623	4.7%
Northern Ireland	£667	£639	4.4%
Scotland	£664	£635	4.6%
North East	£540	£517	4.4%
North West	£721	£694	3.9%
Greater London	£1,648	£1,597	3.2%
East Midlands	£642	£625	2.7%
South East	£1,013	£989	2.4%
South West	£838	£819	2.3%
East of England	£917	£898	2.1%
West Midlands	£701	£688	1.9%
UK	£947	£918	3.2%

So with Greater London showing a 3.2% increase and the positivity in the Prime London Market, following the recent election, now is a good time to invest, in the right buy to let property. For more specific advice and to be offered well-priced opportunities, please email jonathan@greenstone.com

What to consider when becoming a landlord

The process of becoming a Buy-to-Let landlord may not seem straightforward, with a complex set of regulations understandably a deterrent for investors and letters looking to jump into the market. But a look beyond the paperwork and red tape provides clear benefits for anyone wishing to invest and let out their own property in 2020.

The benefits are there to reaped, however; BTL mortgage rates fell in the third quarter of 2019, with the interest on both two-year and five-year fixed loans both cheaper for buyers; £144 less than it was in June for the former and an attractive £324 cheaper than 12 months ago for the latter, respectively.

Lenders are keen to massage the market and offer lower rates in an effort to encourage landlords both old and new back to market due to tighter rules and fears over the effect that Brexit could have on house prices. But caution must still be preached, as you’ll find in our tips below:

Invest carefully
It might seem obvious, but your rental income has to be enough to pay your buy-to-let mortgage. Lenders will use stress rates to help to calculate affordability, which covers the following aspects; the ability of a landlord to pay a higher rate of interest on the borrowed money, the cover ratio of interest, minimum income requirements and the rental cover rate.

With this in mind, researching in your local area is vital. Using the nation’s capital as an example, London Money broker Catherine Beaumont offers the following advice: “Research the area in which you are investing. Currently for many properties in London, the rental income isn’t enough to service the mortgage.”

Stamp duty also comes into the equation, with the purchase of a second property incurring a charge of 3%. This must all be taken into account when it comes to choosing to invest.

Tax breaks will soften financial blows
Whilst the aforementioned stamp duty charge, designed to stall the market and make buyers reconsider their purchases, has acted as a deterrent to some due to the requirement of a larger outlay of cash, there is some relief for potential and current landlords in the form of tax breaks.

“Repairs, service charges, utilities paid by the landlord, and letting agent fees are all claimable against your taxes,” advises Gorge Parker, assistant manager at Blick Rothenburg. “Likewise, the cost of replacing items, such as sofas, beds, tables and any moveable items, is allowable, but, importantly for first-time landlords, the initial outlay on new items is not.”

Thankfully, cuts to mortgage interest tax relief will occur in 2020, with a 20% income tax deduction added instead.

To go fully managed or go solo?
This is always a big question for first-time landlords and a huge factor can be the time you have available to manage your rental property. Many taking their first steps into letting a property may benefit from hiring an agent to manage their home and deal with the tenant directly while others living closer to the property in question may be perfectly placed to manage things themselves.

“For a fully managed service expect to pay between 8 per cent and 20 per cent of the rental income plus VAT,” offers Jeni Brown, sales director for Mortgages for Business. “In my experience, the fee feels very expensive until you have an issue, and then the ability to leave it to the agent becomes priceless.”
Weigh up your options; if you cannot afford the cost of a fully-managed letting service then you need confidence in your rental agreements and plans with your tenants to make sure you don’t miss out on any mortgage payments.

As with taking any big step in the property market, the key is to property educate yourself prior to making a decision about becoming a Buy-to-Let landlord. Research your local options, get the lowdown on the local market, get your finances in order and if you have tenants ready to move in, make sure you’re prepared to deal with any potential bumps in the road.

Greenstone fully manage 100’s of properties and can advise and handle all aspects of residential lettings and ensure you are compliant. Please contact adam@greenstone.com for details of our service and charges.

Chinese New Year Tea Ceremony @ Paddington Central

Paddington Central have partnered with T-Lovers to deliver a unique Tea Ceremony experience to celebrate Chinese New Year on January 22nd.

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