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  • Property-a-holics

    My Predictions for Property Investors/property market for 2016!!!

    It’s that time of year when people begin predicting what will happen in the property market next year.
    I have read several predictions that property prices will increase:

    “Savills is the latest high-end agency to give its forecast for the housing market in 2016 and following years.
    It says that overall the scale of interest rate rises will dictate the pace, distribution and sustainability of house price growth, but it anticipates that average UK prices will rise 17 per cent by the end of 2020, but with big regional variations.”

    I am going to stick my neck out and risk the wrath of other property investors!
    First I will explain what is informing my prediction, then I will make my prediction and run for cover.

    1. I am not going to explain why many, many people will sell their buy to let properties after they have spoken to their Accountants – for those who don’t know about the changes made in the Budget I will leave those who understand the details much better than I do to explain. But I have now spoken to enough colleagues to know that the market is going to be flooded with properties (previously rented) for sale because they cannot see any way other than to sell up. Quite apart from the number of prospective tenants who are telling me that they are leaving their present rented properties because their landlords are selling up.

    2. New measures to tackle rogue landlords and overcrowded housing - New measures will clamp down on criminal landlords who trap and cram vulnerable tenants in unsafe, overcrowded homes, Brandon Lewis announced. https://www.gov.uk/government/news/new-m...ed-housing

    In a nutshell Government are going to stop:

    • Those who rent properties with undersized rooms and inadequate amenity facilities
    • Those who do not ensure that their tenants are safe
    • Those who do not keep their properties in good repair
    • Those who do not meet all their legal obligations

    3. Local Government Finance (Tenure Information) Bill (HC Bill 17)

    http://www.publications.parliament.uk/pa...2.htm#l1g1

    This bill when it becomes law, and it will trust me, will give local authorities all the information that they need to map the PRS in their areas. It will also give HMRC, HSE, Fire Departments… the information they need to enforce the regulation and legislation for which they are responsible.

    4. The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015

    http://www.legislation.gov.uk/uksi/2015/...tents/made
    This legislation, which currently only applies to new tenancy which began after 1st October 2016, will eventually apply to all tenancies. Under previous legislation landlords and letting agents often got their applications thrown out of court because of errors on the Section 21 Notices – MANY more will fail under the new legislation. The result of this will be that landlords will be forced to use Section 8 to evict bad tenants, which will take much longer and has the potential to trip them up because they have insufficient evidence to make their case. Those who just want their properties back, because they want to sell them…, may find that their failure to comply with the legislation at the start of the tenancy precludes them from ever using Section 21 to evict that tenant. I wonder whether the lenders have realised the full implications of this?

    Prediction number 1.
    The Rent-to-Renters will run for the hills when they are unable to make profit from buildings which they have chopped into dog boxes and which fail to meet amenity/safety/HMO Management standards. This will leave the owners to face the consequences of licensing fees and Legal Enforcement Notices/major works while dealing with a house full of tenants who they know nothing about and with whom they have not legal contract.
    Once they sort out the mess – Lord help them – they will sell up.

    Prediction number 2.
    The “accidential landlords” who don’t think that they are landlords and who have not declared their rental income to HMRC because “we don’t make a profit we just cover the mortgage costs” nor have the met the most basic legal requirements of Gas Safety nor Deposit Protection - will evict their tenants and sell up.

    Prediction number 3.
    This is not rocket science, people go into the property rental business to make money and when they are faced with a tax bill which is bigger than their profit – they will sell up

    Prediction number 4.
    Landlords who have been in the business as long as I have, almost 44 years, are getting tired of new legislation/regulation and escalating costs and realise that the party is over. They will either find a good Letting and Managing Agent or sell up.

    Prediction number 5.
    3.9 million people are thought to be living in privately rented properties in the UK – in my opinion there are many, many more and some of the new legislation will provide more accurate figures which will shock most people. It has long been said that buy-to-let investors prevent people from getting onto the property ladder – I’m not going to go into that except to say we will soon see that this is rubbish.
    The supply of privately rented properties is about to drop through the floor - this will increase rents – this will bring rent controls – more landlords will sell up -this will further reduce supply – this will be a disaster

    I think my prediction for property prices for the coming years is fairly obvious

    How many times can you count the words “sell up”? What do you think will happen to property values when the market is flooded by ex-rented properties?

    I would really like to be wrong and I will be the first landlord to book my place on a seminar which teaches me how to get through this sh@t storm stresslessly, legally and ethically.

    To be clear I am not qualified in any way to make these predictions and I am speaking as a private landlord not on behalf of any organisation with which I work

    Mary Latham Landlord
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    Follow me on Twitter @landlordtweets
    I agree with a lot of what you say Mary. The supply of rented accommodation is going to fall big time.The Councils will be in trouble.At the moment landlords get blamed for everything but when there numbers fall,the housing problem will get much worse.The most vulnerable in our Society are really going to suffer.What is absolutely incredible is that Shelter support these tax changes.How blind and incompetent can you get.

    Holiday lets are the best escape route for many landlords.It's a good alternative to selling up.I can then watch the housing market go from bad to worse but from a safe distance.

    Rising interest rates will send prices down, but when that will happen is anyone's guess.

    A rise of 17% by 2020 is quite a healthy gain.This must mean that savills don't expect a mass sell off by landlords.The accidental landlord will probably disappear if their properties become a liability.
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    Bill Savills are basing their predictions on the obvious

    Supply and demand and Interest rates

    As you and I know there is much more to our business than that.
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    Follow me on Twitter @landlordtweets
    We are selling Mary once our tenant moves out, we'll have to take a hit but what price peace of mind.
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    Hi Mary,

    Thank you for sharing your thoughts. I am always interested to hear your views. Smile

    I shared my 21 predictions for the future of property investment recently.

    Here is my response to your predictions:

    Prediction number 1.
    The Rent-to-Renters will run for the hills when they are unable to make profit from buildings which they have chopped into dog boxes and which fail to meet amenity/safety/HMO Management standards. This will leave the owners to face the consequences of licensing fees and Legal Enforcement Notices/major works while dealing with a house full of tenants who they know nothing about and with whom they have not legal contract.
    Once they sort out the mess – Lord help them – they will sell up.

    >>> This is not such a bad thing imho. Too many newbies without financial back-up are being encouraged into Rent to Rent as a way to get into property with no money.

    The gurus will start to struggle to fill seminars imho.

    Prediction number 2.
    The “accidential landlords” who don’t think that they are landlords and who have not declared their rental income to HMRC because “we don’t make a profit we just cover the mortgage costs” nor have the met the most basic legal requirements of Gas Safety nor Deposit Protection - will evict their tenants and sell up.

    >>> I welcome a more professional PRS. These landlords as you say do not even know they are landlords! If they exit, the pool of rental properties will decline, and rents will go up.

    Prediction number 3.
    This is not rocket science, people go into the property rental business to make money and when they are faced with a tax bill which is bigger than their profit – they will sell up.

    >>> The jury is still out on this although I tend to agree with you. Again rents will go up as the rental stock diminishes.

    Prediction number 4.
    Landlords who have been in the business as long as I have, almost 44 years, are getting tired of new legislation/regulation and escalating costs and realise that the party is over. They will either find a good Letting and Managing Agent or sell up.

    >>> I think a lot of these landlords will adapt and keep the faith. Older landlords may decide to exit, but that is natural attrition.

    >>>I think holiday lets and buy to sell will become more popular.

    >>>>More properties will be bought outright for cash, so lenders may struggle to get business. Leveraging will be a thing of the past so large portfolios will be far more difficult to build and we will not see so many "mega" landlords created, as we have since the early 2,000's.

    Prediction number 5.
    3.9 million people are thought to be living in privately rented properties in the UK – in my opinion there are many, many more and some of the new legislation will provide more accurate figures which will shock most people. It has long been said that buy-to-let investors prevent people from getting onto the property ladder – I’m not going to go into that except to say we will soon see that this is rubbish.
    The supply of privately rented properties is about to drop through the floor - this will increase rents – this will bring rent controls – more landlords will sell up -this will further reduce supply – this will be a disaster.

    >>>> Yes, it could be a downward spiral. Those that stick with it and have additional income streams outside of property will find that they can put rents up.

    >>>> Any down-turn in property values will be felt far more in the North than in London and the South East.

    >>>> PD rights may also see an over-saturation in flats in city centres. Houses are going to become a commodity imho so houses all the way for me.
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    I'm not so sure we'll see an end to portfolio-building landlords, nor leveraging. We could see the speed with which landlords build portfolios slow for a while whilst they get their affairs in order, but landlords are by and large an adaptable bunch.

    I think limited company purchases will become the norm for any landlord with more than one or two properties, and limited company mortgage products will become more competitive and widespread as lenders begin to vie for this business. Due to the tax exposure, I don't think we'll see existing assets transferred into limited companies; rather, landlords will leverage their new purchases to reduce the debt in their private portfolios.
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    Writer: Commercial Trust Limited Follow us on Twitter: @CommercialTrust Please note that anything I write is for information purposes only, and not to be construed as advice. Commercial Trust is regulated and authorised by the Financial Conduct Authority. Registration number 610175.


    (18-11-2015 05:55 PM)Ben Gosling Wrote:  I'm not so sure we'll see an end to portfolio-building landlords, nor leveraging. We could see the speed with which landlords build portfolios slow for a while whilst they get their affairs in order, but landlords are by and large an adaptable bunch.

    I think limited company purchases will become the norm for any landlord with more than one or two properties, and limited company mortgage products will become more competitive and widespread as lenders begin to vie for this business. Due to the tax exposure, I don't think we'll see existing assets transferred into limited companies; rather, landlords will leverage their new purchases to reduce the debt in their private portfolios.

    I think you have written a lot of truth
    I think the New Breed of LL via Lt Co will move forward and I think you will see a lot of New Mortgage Products being introduced too
    Any lender with sense will see opportunity to hold on to a Borrower who has a track record being a good payer
    There are a number of good points about using Ltd Co but there is a downside too
    It will be interesting to see where we all end up
    I know I will use a new Ltd Co even with its drawbacks
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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Light at the end of the tunnel..tenant demand will rocket also if in the lha market systems favourable to the lha landlord are about to come in via universal credit I am a big rent to renter and yes it will hit us my margins will be hit on some properties I have to close a room down that's much to do with Doncaster New minimum room size of 10 sq metres so double hit for me . I have many rent to renters it will not affect as hmos already I not happy but staying positive anything I buy now are into my limited company hmos are my best investment and I will continue my goal was is to increase my net over the next few years to combat the negatives also doing joint ventures rent to rent and existing portfolio gave me the opportunity to grow doing b1 to hmo now I do think our business will look different in few years time not happy just got to keep positive and keep trying re inventing we also manage HMO s in Doncaster and Lincoln
    It's crxp but we just got to keep going I think via limited companies and not taking too much profit out because of the new dividend changes will be the new way forward many investors who could have gone fulltime earlier in the past will need to make money elsewhere for longer paying mortgages down quicker buying to sell will be more popular .
    I agree Mary that prices may be hit depends on how many start to dump
    Kim
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    Very interesting points Mary. However I think that your are too pessimistic overall.

    Regarding the property market as a whole, the underlying situation is that in many areas demand outstrips supply.
    Population keeps increasing while construction of new dwelling has been decreasing. This won't be resolved overnight.

    As long as this situation remains property prices will be pushed up.

    If some private landlords sell up as a result of all the negative new regulations coming up, it might sporadically depress prices in some areas.

    But, to me, this means that some buyers will be able to snatch properties at a bargain. Then prices will just go back up.

    A large drop in prices would be needed in many areas for the majority of tenants to take advantage of the situation and buy. Thus, most tenants won't be able to buy.

    Therefore, because the imbalance between supply and demand will remain, and thus high prices and demand for lettings, what may happen is that private landlords geared for the "new world" will snatch properties.
    These landlords are more likely to be large and cash-rich, and companies (not affected by the tax changes and able to navigate the regulations), while the losers will be the small, individual landlords.

    At the end of the day, tenants will lose out because rent will continue to rise, choice and competition will decrease, and they may have to deal with corporations (which will be savvy enough to charge them fees at every turn) instead of being able to strike a rapport with their landlord.
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    This could go a number of ways. Interesting times ahead.

    Legislation will change again when future governments realise what a mess has been made.(Should these predictions come true; especially rent control)
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    Not wishing to write reams, which I could well do so:
    Leaving the PRS is the same as entering the PRS in that there is not a one size fits all reason, and will vary from area to area and with each of us as individuals. Many people will exit at a loss because in their naivety they invested in something they didn’t fully understand (typically low value properties in low economic areas) under the holy grail premise of ROI. Savvy decent investors will not want to buy these properties (more so as current government thinking, quite rightly, is to improve the quality of existing rented stock) and LA’s have not got the money to do so.
    Good quality housing in good economic areas will always, in the long term, appreciate in value and have a good rental demand. Those who have trod this path on a sound financial basis will remain and prosper.
    I accept that demand and supply are factors in rent levels, but affordability is as important and is what may well cause economic unrest. The solution is to either change the demand or change the supply, but the government is incapable of doing either. They also have the non equilibrium problem of low inflation/interest rates and rising property prices to solve.

    @Elaine63
    What went wrong with Boomingham?

    @Mary
    As you are an experienced and knowledgeable landlady I respect your opinions, especially your view on the increase in legislation and regulation.
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