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The outcome of Government meddling in the PRS is as inevitable as chocolate melting because it is placed too close to a fire.So, I thought I would lay out the inevitable consequences of Section 24 in a clear and easy to understand manner:1. What is Section 24?What is your definition of retirement ?2. Section 24 deters landlords from investing in the sector. Those that are in the sector start to sell up. Rental stock starts to reduce.Rental stock declines - 1st time in 18 yearsNet loss of 133K rental homes in coming yearAlmost 4,000 Landlords a month are selling!3. Local authorities find that they are unable to discharge their housing obligations into the PRS. Their waiting lists increase and they have to move tenants hundreds of miles away, away from their family and support networks.
4. There are fewer rental properties, so market forces say that, where there is scarcity, there is value, and prices increase.News just in:The latest rental data provided by Landbay shows that average rents in the UK rose 0.13 per cent in August, the highest monthly increase since April 2016.
On an annual basis, UK rents grew by 0.97 per cent, which is the highest level since May 2017 and, excluding London, 1.25 per cent. This compares to 1.18 per cent as reported a month ago.
Staying on the topic of London, growth was positive inside the capital, withrents increasing 0.44 per cent on an annual basis (0.10 per cent monthly) – the quickest rise in two years.
The data reveals a similar story across the country: in the East Midlands monthly rates grew by 0.32 per cent, in the South West, 0.16 per cent, in the West Midlands, 0.15 per cent, and 0.13 per cent in the East of England. The North East, however, posted a drop of 0.03 per cent.
The average monthly rent in the UK now stands at £1,209, or £767 excluding properties inside the capital.
Landbay founder and chief executive John Goodall says: “Following a slowdown in rental growth the changes are likely influenced by a number of regulatory and tax changes introduced over the past two years.“As landlords begin to feel the pinch from these changes, combined with a reduction in the supply of new homes, the inevitable consequence is an upward pressure on prices. The government must start to see landlords as a vital part of the UK housing market, rather than an easy target for raising the coffers. Any further changes to regulation or taxation will only end up on the tenant’s door."Full/source articleI am pleased to report that myself and Nick have been invited to meet with the Housing Minister James Brokenshire's Special Advisor in London next week to present our views on the private rented sector. We will then be attending a Private Reception for the PRS at the House of Commons, organised by the RLA.Politicians and key industry stake-holders are all in attendance and we hope to record some video footage of the event to share here. The timing for this event could not be better!As I have said before, the tide will turn. I think we are currently in "slack water" now (to use another nautical analogy), but the evidence against Section 24 continues to build. There may be further pain and attacks on landlords. But the end result is inevitable.9 reasons why Section 24 will be reversedHang in there!
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
"On an annual basis, UK rents grew by 0.97 per cent" Whats inflation at again?
_________________________________________________________________________The above post is not financial advice, its often me rambling - passing time on a coffee break.If you are looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance._________________________________________________________________________
Thank you for this update Vanessa. Very interesting and hopefully the tide will turn before is too late. For me personally as the landlord by 2020 some of the properties will stop making any profit and I will have to pay for the privilege of owning them.
Hi Alexander. With respect, if any of your rentals are going to be making a loss because of S24 then that can only be because your business model is seriously flawed i.e. your borrowings are too high and you have not allowed sufficient safety margin.
I am not sure any stress test model took account S24 prior to it being introduced
So a high LTV model was not flawed pre 2015 if like me you had sufficient safety margins
It still isnt, providing (in most cases )its wrapped up in a limited company
S24 was akin to 25% of my portfolio being badly fire damaged on the same night .
Very very very improbable
What would be a mistake though would be to do nothing in the intervening 5 years to adjust
I`m sure Alexander has made moves to adjust his model in light of S24
I know I have . One of those moves is to raise some rents well above inflation level
Jonathan Clarke. http://www.buytoletmk.com
When economics are discussed I think the whole picture needs assessing. You can't take something in isolation as I keep seeing when things are written about s24.
For example, 4000 houses a months coming on to the market may mean an increase in supply of houses to buy. This means prices may reduce - or not increase at the rate they otherwise would. Who is buying these extra houses that are up for sale - not landlords presumably as they are 'selling up'?
Therefore I assume it is mostly owner occupiers, many of whom may have rented previously. Demand for rental property is reduced? Or maybe just cancels out the supposed effects of reduced rental stock.
Cheaper houses prices due to an increase in supply as a result of government legislation of the PRS means more tenants can find themselves able to afford a house?
I have seen very little credible assessment of the impact of s24 (just mostly biased LL opinion).
What is the real picture? To me house prices in the south and in London are certainly stagnating or reducing, helping people to buy, and possibly easing demand for rental property? Or, as I say, cancelling out the purported effects of s24.
Rural Practice Chartered Surveyor. Experienced in estate management, residential investments, planning and development and rights for utility apparatus. 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.
To me, the real problem here following government interferance is likely to be overal reduced demand in the market for new build housing and slower build rates.
Meeting the housing minister's special adviser is a very good prospect as ministers take a lot of notice of them (rather than having to think for themselves).
May I suggest you go prepared for this with print outs showing things like number of landlords selling up, rental increases and mass shortages. Also a simplified breakdown of how unfair S24 is perhaps along the lines of the above article, with all sources referenced so the adviser can check (or pass on to the minister as if he has done all the work himself). Also perhaps something that shows how vital a robust rental market is to allow easy movement of workers to where the jobs are.
If all the above are supplied in a report format that is easily referenced we may actually get our views across.
Hi Paul,We are taking a "softly softly"/ conciliatory approach to this meeting to get through the Government door, so to speak. We have been made aware that the Government has a desire to communicate with landlords and engage with them, and we want to contribute to that process and work with them for the greater good of landlords, tenants, and the PRS.
I expect it to relate more to the impact of three year tenancies rather than S24.
Word on the street is that the 3 year tenancies will be scrapped though.