What are the big things that may affect us as investors in 2018?
There are a number of things that could possibly affect us next year good and bad, and below is a list of some of the main ones so we can plan ahead.
1) Rents are expected to rise by the highest rate for 5 years. Evidence from the property managers at Embrace property lettings where we manage hundreds of tenants leads us to believe this could be at least 10% in the Midlands for 2017. Less new landlords are buying, many having being put off by the 3% stamp duty surcharge and inability offset all mortgage payments against rent for tax purposes. This lack of supply balanced against continuing immigration is creating high rental price growth.
2) More Landlords are continuing to incorporate their buy to let properties. Many accountants have been organising transfers from personal names to Ltd company, and we are seeing many investors continue to buy in companies at Embrace property sourcing. You should talk to a qualified accountant to see if this is the right strategy for you.
3) More landlords have been shifting to higher yielding assets such as HMO’s, temporary and serviced accommodation to pay for increased government taxes and regulations.This is saturating the market in some areas though and so it is important to do your research even more to check demand. It is also meaning in our area that their are opportunities to buy discounted single lets as their is not as much competition around for these currently.
4) More and more councils are bringing in selective licensing. It is important you check whether your local council has it currently, or is planning to bring it in, so you can plan your figures around this if needed.
5) Mortgage lenders and valuations have become tighter this year with many lenders stress testing at 145% and 5.5%. We have already seeing some lenders enter the market with lower criteria and as 2018 goes on I believe some will relax these rules a little, and we could see new lenders with lower criteria take over a lot of the market.
6) Letting agents will have to change the way they collect fees. With proposed legislation banning fees being taken from tenants many letting agents are preparing themselves to change systems to ensure they are ready to comply with this legislation. These new rules are not set in stone though. In addition to this, a lot of letting agents are also looking to the Scottish rental market where tenant fees are already banned, and in many cases letting agencies have managed to maintain their fee income by restructuring this.
7) A lack of housing supply will continue to drive price growth until the government is able to build enough homes to bridge this shortage. This was mentioned in the recent budget as stated below.
8) House price growth in London is forecast to lag well behind other regions over the next five years, reversing a trend stretching back decades, according to a new report. Savills estate agent, is predicting that average house prices in the capital will fall 2% in 2018, and be flat in 2019, before returning to growth after this. Overall, property values in London will rise 7.1% between 2018 and 2022, far below every other region and sharply down from the 56% growth seen in the capital over the last five years. Across the UK as a whole, Savills expects house price growth to halve to 14% over the next five years, from the 28% growth recorded since 2012.
9) In his latest budget Philip Hammond promised to build 300,000 homes every year, and bring in new rules to relax planning in the future. This could help developers to build more homes and bridge the housing shortage supply, however this remains to be seen on whether they hit target, as the track record has not always been good. There was also some good news for first-time buyers, as the Chancellor revealed that anyone seeking to buy a property worth up to £300,000 will be exempt from paying Stamp Duty Land Tax with immediate effect. This could effect house prices as well. Meanwhile, the income tax personal allowance will increase to £11,850 from April 2018, with the higher rate threshold rising to £34,500.
10) More small buy to let portfolios could become available from landlords who are unable or unwilling to incorporate to a Ltd company to avoid new taxes. This could reduce the private rented sector further meaning larger incorporated landlords are going to have more choice of tenants and buy to let properties to purchase, possibly at discounted prices in bulk. This could be a great opportunity for some, and 2017 has already seen many landlords sell and exit the market due to the economic pressures.
All in all you can see that their are some big things that could effect us in 2018, good and bad. With change comes opportunity though, for some investors, and so it is important to get the right guidance when making decisions and to look at your long term plan.
Keep posted in the new year for our next free workshop where we will be covering our sourcing service, how we can help you, and our predictions on what will be profitable in the new year.