Buy-to-let landlords face another swathe of complications in 2021, from the impact of coronavirus restrictions and Brexit on property investment to the uncertainty around the eviction process as well as the end of stamp duty holiday.
Yet almost half of those who invest in the private rented sector – 45 per cent – remain optimistic about the buy-to-let market in 2021, according to a January survey by online mortgage broker Property Master.
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And despite concerns that capital gains tax rates could be raised along with other regulation changes, only 10 per cent of the landlords surveyed plan to exit the sector.
While uncertainty is the most straightforward prediction to make for 2021, experienced property investors told i they anticipate that house prices will continue their longer-term growth path.
One of them is Mark Trup, co-founder and chief executive of property management company, Arthur. He toldi: “When it comes to Covid, I can see the light at the end of the tunnel. Hopefully by the summer, at the latest, things will be more relaxed and the market will slowly return to normal”.
The 58-year-old, who has a property portfolio of about 100 privately owned rental properties, adds: “We had a real concern that people wouldn’t be able to pay their rents last year, so we took a government’s loan to cover us in case that happened – but we were quite lucky. Just three of our tenants found themselves in difficulty, but we managed to come to an agreement and made a payment plan.”
Although it won’t affect his own portfolio, Trup predicts some areas of the sector might be more affected by Brexit than others. “The student rental sector might be affected with less overseas tenants likely to return to the UK. That said, people always need somewhere to live and somewhere to rent. I don’t think rental prices will go up this year but property prices will continue to rise,” he added.
House price boom
Since the spring lockdown eased, various house price indices have reported a housing market “boom”.
According to the latest data from HMRC, the number of housing transactions in December was 34 per cent higher than in the same month in 2019 and 14 per cent higher than in November.
Separate data from property services company, Hamptons International, estimates that around 51,000 home were bought by landlords in the last quarter of 2020, the highest level since 2015.
The stamp duty holiday, which waives the charge on the first £500,000 of any home purchase, saving buyers up to £15,000, has been one of the factors driving market activity to its recent peak.
If the tax break stops at the end of March as planned, property experts expect a slowdown in sales completions following a rush to beat the deadline – however some believe there will still be opportunity for price growth.
A Rightmove spokesperson said: “We anticipate a slower second quarter once the stamp duty holiday is over, though even with the average asking price in Britain up by 6.6 per cent in 2020, cheap mortgage rates that are available for some leave scope for further modest price growth despite the loss of the tax saving. Indeed, all regions have seen far greater average price increases than the average savings in stamp duty, indicating affordability headroom.”
No signs of slowing
Meanwhile, experts from Hamptons International expect house price growth to accelerate to 2.5 per cent in 2022 and 3.5 per cent in 2023 across Great Britain, equating to 8.0 per cent over the next four years.
These predictions partly explain why landlords taking a long-term approach believe that holding on to their property for long enough means they should eventually see significant returns.
This is the approach taken by Leah Miller, 22, who set up LCM Home, a company which transforms old properties into living spaces, with her mother Sheryl in 2019. She believes the pandemic will eventually play to her business’ advantage.
Miller told i: “We think there has been a noticeable rise in people actually looking to live in a house share. Loneliness was a problem even before the pandemic hit; not exclusively the burden of senior people who are widowed and living independently, but a phenomenon really common amongst 20-something.
“Where co-living was once seen as quite an undesirable lifestyle choice, the preserve of students, it’s now becoming a popular solution for financial, practical and also emotive reasons.“
The uncertainty caused by the pandemic meant that Ms Miller has had her share of problems in 2020. She received a down valuation on one of her company’s properties, while UK shortages of plaster delayed refurbishment work on another one of her homes.
She adds: “We also had to start doing things differently in terms of online viewings and auctions. Because of the restrictions, property viewings are incredibly restricted. During lockdown, it was also difficult to get signatures witnessed.”
Despite these challenges, two co-living house shares in her portfolio went live on the market last year and are now occupied.
She says: “We’re still pretty optimistic and not worried about the health of our business. There will always be a need for good quality housing. We are just in the process of going to viewings to try to find the next property that would be suitable to work as a co-living house share.”
“The challenges of running a business of this kind at this time are not unique now – we’re taking this all as a useful learning experience. “
No choice but to sell up
There will, however, be cases where landlords will have no choice but to sell up as a result of unfortunate circumstances where either they themselves, their tenant or both have been negatively affected by the fall-out from the pandemic
i previously reported that thousands of residential landlords have been forced to sell their properties after many were left powerless to oust tenants committing anti-social behaviour or withholding rent for reasons unrelated to Covid-19 with some not receiving any rent in over a year.
Andy Foote, director at SevenCapital and landlord, believes this should serve as a reminder for all landlords going forward, in making sure they have enough reserves set aside to cover not just maintenance, but unexpected void periods and emergency payments.
According to Foote, it will be extremely optimistic to expect any significant growth this year, but it should equally not be a deterrent to landlords who want to grow their portfolio or those considering becoming a landlord – and it shouldn’t be a reason to sell up in 2021.
He says: “The property market follows a cyclical pattern, and this pattern has historically always resulted in an upwards climb in prices: the momentary downwards trajectory on the cycle soon reverts to a climb and rises higher than the previous peak.
“If a landlord can financially sustain any blips this coming year and capital growth is their goal, they would be foolish to let go of a property in 2021. Unless your strategy is flipping and you are good at it, property is a long-term investment so it’s imperative to keep your mind focused on the long-term too.”
“For 2021 landlords should be prepared to weather the storm and if they can do that, from 2022 onwards, they can hopefully begin to reap the rewards.”