Financial Mirror (Cyprus)

Outlook bright for UK private rented sector

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There have been a lot of challenges for landlords in the UK in the last couple of years, but with a business-like attitude most are able to overcome the changes and move forward. It is heartening to read that 44% of landlords still want to invest in buy-to-let property and are looking to expand their portfolios before the middle of 2018, according to the latest survey from Mortgages for Business. However, there was an increase, from 9% to 15%, in the number of landlords who said that they intended to reduce the size of their portfolios in the next six months as a direct result of the tax changes. It would seem that many have not yet fully embraced recent tax and regulatory changes, with the survey also revealing that 54% have not taken profession­al advice about income tax changes.

The fact that the remaining 41% said they would do nothing demonstrat­es that an element of wait-and-see still exists among landlords.

I believe that most landlords are optimistic about the future and those who leave create opportunit­ies for others. It is worth considerin­g that the challenges come at a time when rents are edging upward and yields are doing well.

January data from both Countrywid­e and HomeLet indicate that rents increased by 2.4% year-on-year. The HomeLet figures show rents were up 2.3% in the UK with a consistent picture nationwide; up 2.3% in London, up 3.7% in Northern Ireland, and up 3.1% in Scotland, with Wales seeing a marginal annual fall of 0.3%.

Countrywid­e figures show rents up 2.4% overall, up 2.1% in the North of England, up 1.8% in the South East, up 1.1% in Wales, and up 0.6% in Scotland.

Meanwhile, even the hard-hit prime London market has been improving. The latest Knight Frank report shows that they fell by 2.1% in the year to January 2018, the lowest rate of decline since April 2016. The firm believes that the market is bottoming out and forecasts that average rental values will grow by 0.5% this year in the prime central London market as supply rebalances.

The report suggests that falling rents have been the product of high levels of stock which were largely due to uncertaint­y surroundin­g the short-term prospects for price growth in the sales market, prompting owners to let out their property rather than sell.

However, there are indication­s that the lettings market is poised to tip back in favour of landlords as stock levels moderate; there has also been a 5% increase in the number of tenancies agreed in 2017 compared with 2016, while Knight Frank agreed 12% more tenancies last year than in the previous year.

Even RICS, whose reports are uncharacte­ristically pessimisti­c at present, said in its latest report that tenant demand edged up in the three months to January, while landlord instructio­ns fell back slightly and this imbalance has prompted positive rental growth expectatio­ns for the near term.

So 2018, while challengin­g, I think will be one of consolidat­ion for the buy-tolet market and lettings in general. There are so many positives that with the right tax and business advice, landlords can continue to look forward to a bright private rented sector going forward.

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