Are The Clouds Lifting?
With the general election concluded and Brexit on the horizon, 2020 is set to be an interesting year. There will undoubtedly be changes which will impact landlords, and although some of the detail remains cloudy at this point, our eight offices are set to deal with the changing face of the private rental sector (PRS).
A window of certainty
Nearly four years of uncertainty caused by protracted Brexit negotiations have clearly impacted the PRS. We have seen tenants demanding far more flexibility in their contracts and prospective landlords delaying letting properties due to ‘the unknown’. As such, the conviction of the government’s plan for the UK to leave the EU on 31st January could result in moderate improvements in demand from tenants and landlords as optimism returns – assuming any post-Brexit Right to Rent issues are properly addressed. There are, of course, longer-term uncertainties which could affect the market, but we are likely to see a bounce in the first six months – make hay while the sun shines!
Phased legislation comes into effect
Several existing pieces of legislation have been phased in over the last few years, with many further or final changes coming into effect this year. Some impending changes include:
• MEES: The Minimum Energy Efficiency Standards came into effect in April 2018 for new tenancies (including renewals), but by the 1st April 2020 this will cover all existing tenancies as well, meaning that properties rated F or G will be ‘unrentable’ from that date. There are exemptions to the MEES rules – talk to your Property Manager if you’re unsure.
• Tenant Fees Act: From June 2020 the ban on charging fees to tenants will apply to all existing tenancies (not just new tenants).
• Tax relief on mortgage interest: By April this year landlords will not be able to claim any tax relief on mortgage interest payments, instead receiving a 20% tax-credit on interest payments. These changes have been phased in over three years and in that time many landlords have, for example, changed ownership for inheritance planning or set up limited companies when buying new rental properties. Indeed, research has shown that a limited company structure is becoming the preferred route for buy-to-let(1).
• Anti-Money Laundering: The 5th directive on Anti-Money Laundering (AML) means that agents will have to carry out checks on landlords who earn over €10,000 a month from residential property. If a rental property is over the €10,000 threshold (around £8,500) then both the landlord and tenant will be subject to AML checks.
Projections show that 25% of people will be living in the PRS in five years’ time(2). As that number grows so will their influence on the government so there could be yet more legislation in the coming years. It’s important that your agent remains ahead of any changes to ensure you remain compliant.
In early 2019 the government announced that mandatory five-year electrical installation checks on private rented housing would be introduced in a phased approach, however no further guidance has been published, which is disappointing. We have always strongly recommended this as company policy; how can a landlord carry out their common law duty of care to their tenant if they can’t be sure of the electrical safety of the property?
New measures to protect tenants…
The Queen’s Speech in December confirmed that a new Renters Reform Bill will be introduced. The Bill proposes:
• Removing Section 21 of the Housing Act to end ‘no fault’ evictions and reforming grounds for possession
• Giving landlords more rights to regain possession
• Introducing lifetime deposits, which move with the tenant from property to property
• Widening the scope for entries on the rogue landlord and agent database
There is no timetable in place at present, and no detail on what Section 21 would be replaced with or how a lifetime deposit would work if part or all of it is retained against damage. Whatever the next step, the government must take care not to push landlords out of the sector or discourage landlords from investing as this would inevitably reduce supply, which could impact negatively on tenants with much higher rents.
…but no movement on regulating agents
The government’s Regulating Property Agents Working Group report last July stated that the regulation of property agents is a “matter of great importance, with the potential to significantly improve consumers’ experience of renting”(3). Yet there have been no further plans announced since. We hope that 2020 sees these proposals move forward, as this is something we have long advocated.
Local Plan feedback
Oxford City Council will shortly receive a report from government inspectors on final recommendations for the Oxford Local Plan, including the future of housing in the city. Several sites, including the recreation grounds of various Oxford University colleges, were discussed as potential locations for new homes. South Oxfordshire District Council will also shortly hear from the government about the future of its local plan after the communities secretary took it over following the authority’s announcement of plans to scrap it and prepare a new local plan. Watch this space.
Large transformation projects take time
Oxford North (Photo above) is a £500m project promising 480 homes, 4,500 new jobs and commercial space as well as acres of open space. After years of planning, there has been some progress with the site receiving resolution to grant by Oxford City Council in December. Full planning permission should follow subject to legal agreements. Elsewhere, the wait continues for the Oxpens redevelopment, the next phase of revitalisation of the West End following the Westgate revamp. We anticipate more detail on both large projects later in the year.
The future of property in Oxfordshire
Oxfordshire has one of the most successful economies in the country(4) with low unemployment rates, strong earnings, and a highly educated and skilled workforce. The Strategic Economic Plan indicates that up to 86,000 new jobs could be created by 2031(5) and the population is predicted to rise over the next 20 years (see graph) making it an attractive place for property investment. Indeed, Oxford was recently ranked as the best city in the UK for buy-to-let investment(6).
Our sales and acquisitions department, Inspired Investment, works with multiple UK and overseas investors who specifically target Oxford for their property investment. For example, we recently helped an investor acquire a 2 bedroom apartment in the city centre which will provide them a 4.5% return (Photo above). The last few years have certainly been challenging for landlords, but property investment can still provide a solid income with a history of capital increases in Oxfordshire. If approached with a long-term and flexible view it will still be possible to reap the benefits.
16th January 2016
2. UK Housing Market Outlook, PWC, pwc.co.uk
3. Regulation of Property Agents Working Group (2019), Final Report, Available at: https://bit.ly/2sPYwky
4. Good Growth for Cities, PWC, pwc.co.uk
5. Oxfordshire Local Enterprise Partnership (2018), Oxfordshire Labour Market Information, Available at: https://bit.ly/37OdQNj
6. Aldermore Buy to Let City Tracker, Aldermore, https://bit.ly/2N8QdqV