2019 sees business getting worse for many British landlords despite rent levels being strong. House price growth is slowing, or indeed property values falling, so that buying is looking up but selling is a problem. Also buy-to-let mortgages are getting harder and tax benefits are declining.
This gloom news had mostly related to more foolish speculative Buy To Let landlords who were mostly new entrants of recent years and paying high mortgage rates, and could not raise their rents enough. This generally means that the BTL that they took on was not a profitable investment to make at the time, and they had not appraised it properly before taking it on – something that this website has always warned strongly about and always will warn strongly about.
UK home ownership has now sunk to its lowest level since 1987, and reflecting this private renting and rent levels are now strong. And lenders are now providing relatively cheap loans, so that Buy To Let should now be a good investment option. But due chiefly to tax increases and mortgage tightening, UK Buy To Let is really getting much less attractive in 2019, with some now pulling out of it while many others are raising rents strongly with the main problem in areas with the highest house prices. This could soon become a major UK housing problem.
Currently low interest rates, are good for first time buying in 2019 with a mortgage. But house prices may fall back and mortgage loan interest rates should at some point rise. Right now is a good time for buying property to let with cash or on a good longer-term fixed rate loan, especially as rent levels should also hold up well. And if you are after a new mortgage then now is a good time to go for a longer-term fixed rate mortgage rather than a variable rate or tracker mortgage whose cost might well soon rise sharply.
But BTL as always requires buying property wisely and if needed borrowing wisely, neither of which may be easy. As BTL is a medium term to long term business, short term advantages to a loan may be of little help and it is the longer term loan cost that will usually matter most. But lenders often use short term loan advantages to attract, and play down the longer term loan cost, as with many ‘fixed rate’ loans.
Those with existing property portfolios may well have been accustomed to raising increased loans based on increasing property values. Doubts of property values continuing to increase may make that a problem now, and may require loans to be on rent incomes instead. Lenders also have tended to draw up the financial drawbridge to restrict loans perhaps unfairly and are more readily demanding their money back also perhaps unfairly. So loans for Buy To Let landlords have become more problematic. Also from 1 October 2018, any property in England or Wales let to five or more tenants from two or more households requires a houses-in-multiple-occupation HMO License costing around £500 a property – as has already applied to some since 2015. And the Housing Act 1988 new restrictive section 21 assured shorthold eviction notice rules that applied to some tenancies from 1 October 2015, applies to all tenancies from 1 October 2018.
Also, in difficult times the best of tenants may lose their jobs and have to apply for housing benefit welfare to pay their rent and this may involve some rent delay. But once this is in place it should make rent more secure. (English local authorities will consider paying a landlord directly where there is evidence that the tenant is unlikely to pay their rent and ‘making direct payments would be in the interests of the tenant.’ Where arrears of benefit have reached 8 weeks, the local authority is more likely to agree to make payments direct to the landlord ‘unless it is not in the tenant’s overriding interests to do so.’ However, landlords should not wait for the 8 week period to be reached before contacting the local authority.)
If you are thinking of renting out for the first time a house that has an existing mortgage and/or insurance, then you should tell the mortgage company and/or insurance company. If you do not then you risk the mortgage and/or the insurance. Some mortgage lenders and insurers will allow you to remain on the same rates, but others may want to switch you onto their buy-to-let rates (which may be somewhat higher).
UK banks are now giving very little interest on bank savings, so if you have bank savings earning little then it may well be better if you can make extra tax-deductable BTL mortgage payments from such savings.
If you appraise any BTL investment proposal carefully before you commit to it, then any that you take on should be profitable.
If you do not appraise a Buy To Let investment proposal carefully before you commit to it, then you are always taking a gamble. And gamblers often lose.
2019 Property Law
For 2019 law affecting the buying, selling, letting and construction of property in England and Wales, see our Letting Laws section.