Here at Just Landlords we often write on how it’s essential for all landlords to keep up with the changes in the property market as ultimately they will have a knock on effect on their businesses. A number of our previous posts have commented on how the recession has altered the private rental sector, especially as it led to a boom in demand due to the fact that many people were unable to afford a deposit for a mortgage.
However, the Bank of England announced last week that the UK economy was now starting to enter recovery, and positive forecasts concerning the property market followed swiftly after. So what does this mean for landlords? Here we look at some of the most important facts:
#1 – The UK Economy is Improving
The coalition government, along with everyone else in the UK, were extremely glad to hear last week that not only is the economy improving but unemployment rates are also decreasing. Unemployment, the rise in the cost of living and a poor economy previously meant that a number of people in the UK started relying more heavily on government subsidies and were unable to place money back into the economy. This created a vicious cycle which led to a ‘double dip’ recession, and stagnated the property market for a number of years. Now that things are starting to improve property prices are on the up and the construction industry is creating more jobs and funding for the economy.
#2 – More People are looking to Buy Property
At first, this may sound like a negative situation for landlords, but the fact of the matter is that during the housing crises there was not enough private rental accommodation to meet demand. It also meant that letting became riskier, as there was a good likelihood that your tenants would struggle with financial issues and therefore fall into rent arrears. Being a landlord during this time was therefore extremely stressful, and tenancies were often short lived. Now that more people are looking to buy property, renting will now be seen more of a choice than a necessity, and tenants will be less likely to miss rent payments. However, during any time of change things rarely go smoothly, so it is advisable for all landlords to protect their business with rent guarantee insurance until they are on solid ground.
#3 – Changes will be Slow but Sure
As previously discussed, not long after the Bank of England announced the UK had entered economic recovery a number of letting and estate agents published their forecasts for the property market. Most of these were extremely positive – in fact some even claimed that property prices would increase by up to twenty four per cent over the next five years. However, even though things appear to be positive it is important to remember that there will still be dips in the economy, and you shouldn’t rush into any new investments without careful budgeting. Having a contingency plan is still advisable for all landlords, regardless of the state of the economy, as we all know too well that things can change extremely quickly.
#4 – The Private Rental Sector will Adapt
With property prices increasing and a rise in people looking to buy properties instead of rent, landlords will soon be required to adapt their business plans. Even with demand decreasing, it is unlikely the government will cease its plans to improve the private rental sector, and therefore landlords should make sure their property portfolios are up to scratch. This will also benefit your business once the market becomes more discerning, ultimately leading to rogue or unprofessional landlords falling by the wayside. There are also plans to ensure that all properties have an acceptable energy efficiency rating by 2018, and landlords that fail to meet this deadline will find themselves banned from letting their properties until improvements are made.
While there are currently a number of predictions over the future of the housing market, most are predominantly speculative as it is difficult to know exactly what will happen over the next few years. For example, there are conflicting reports concerning the success of the Help to Buy scheme and whether it is one of the reasons the market is improving. The only thing we know for sure right now is that changes are coming, and those that prepare now will be able to benefit in the future.