Another year has come and gone and the world is changing. In September las year we asked the question of whether there was any point in being a BTL investor. Since then things have changed a bit. So, as Landlords look ahead to 2024 with some uncertainty, what can we make of the current environment and what it means for investors now?
In 2023 record numbers of landlords signalled their interest in walking away from the market altogether. Simply Business gathered from surveys and found that 10% or landlords sold up last year and 25% signalled they would do so in 2024. Why? The most common reasons cited were, unsurprisingly; the growing cost of buy-to-let loans, and rising complexity linked to new legislation. Namely the Renters Reform Bill and environmental upgrades. If this materialises and large numbers of landlords sell up, 2024 is likely to be another bumpy year.
But how likely are these pressures on landlords to occur? Firstly on interest rates, yes we’ve seen a significant increase in rates from historic lows. And yes there are tens of thousands of BTL investors looking to re-finance this year. But, given more recent macro-economic changes, these hikes aren’t looking as bad as they were a few months ago. Market expectations of Bank of England rate drops in the next two years have meant average fixed mortgages have begun to fall. That being said, still around four times higher than before. This will mean that, although the pinch will be tough for many, a number of landlords will be able to hang on and balance the books for now. Time will tell.
Now for legislation. Landlords in 2023 spent a lot of time worrying about ‘imminent’ legislation through the Renters Reform Bill and EPC upgrades. However, neither have yet materialised. Firstly the RRB was shelved by the government while the focus shifts to a possible election and other priorities. That’s not to say it won’t eventually pass into law, placing greater restrictions on rent rises and contract terms with tenants. Landlords now have more time to get ready for it to come into force in the next few years if it does at all. At the time of writing this, Michael Gove, Housing Secretary has told the BBC that no fault evictions will be banned by the time of the next elections and courts given funding to enforce it. So perhaps we will see movement this year once the legislation is revived?
EPC upgrades are also important. They help with reducing carbon emissions in the UK. They reduce costs for tenants on their energy bills and can increase the value of your property. However, some upgrades can be costly, prohibitively so in some cases. The expectation that new rules will come into place by 2025 and and 2028 forcing landlords to achieve higher minimum ratings was a potential game changer. However, as things stand, the requirement stays the same at E minimum rating for rentals. There is no tabled legislation proposing a change. And this government has shelved any plans to make a change until further notice. That being said, in the event of a new government later this year, it’s not out of the question that these rules will be made law eventually, just not in 2024. For now, landlords could consider upgrades to their properties as much as possible within available budgets. It’s a positive step to take regardless of legislation, and keeping an eye on Westminster for what’s next will help many plan for future costs.
Finally, what about the strength of the rental market itself? What is demand like? According to Zoopla’s rental market report demand was down by the end of last year by around 11%. But this was still significantly higher than the 5 year average. They predict a continued increase in rental prices this year in line with inflation at around 5%. However, this is declining from record highs of nearly 20% last year. This is because rental demand is starting to decline. There is still plenty of demand out there, but given cost of living pressures on renters, landlords will need to be more competitive in 2024. It’s more of a case of things returning to a balanced position rather than the wild spikes and miss-matches in supply and demand we saw previously.
All this is not to say there are huge reasons to stay in the landlord space, but perhaps things aren’t as dire as they may have seemed this time last year. Whatever position you find yourself in, keeping a close eye on the economy, local market data and government legislation and manifestos as we approach the next election will be key in being ready for the future.
If you are a landlord looking to sell your property in the next few years, Keyzy for Landlords would love to help. We will agree to buy your house in 3 years at a fixed price, guarantee a fixed market premium rent with a quality tenant and take over they burden of being a landlord. Talk to us about how we can help you get future certainty in an uncertain world.
Have the good times gone forever, or just for now?