The long-awaited Renters Reform Bill, which contains the government’s proposed changes to the Private Rented Sector, had its first reading in parliament last week.
Despite some of the headlines you may have read, none of these proposals are currently law and as such have no immediate impact on new or existing tenancies.
Here is a short summary of the Bill, and we’ll be sure to keep you informed of any further developments.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
Yesterday, the government reversed its decision to release the much-anticipated Renters Reform Bill this week, according to The Mirror newspaper.
The delay in introducing the Bill to Parliament is attributed to “procedural issues”.
The Conservative administration initially promised the Bill in 2019, and Housing Secretary Michael Gove recently stated that it would finally be published this week, shortly after the Coronation.
However, The Mirror reported yesterday that the government has postponed the long-awaited overhaul due to “procedural issues,” despite pledging to publish the Renters Reform Bill this week, more than four years after the Conservatives initially vowed to eliminate no-fault evictions.
Speculation over the Bank Holiday weekend suggested that Tory backbenchers were dissatisfied with the proposed legislation, which they perceived as favouring tenants and being unfavourable to landlords.
A spokesperson from the Department for Levelling Up, Housing & Communities emphasised their unwavering dedication to providing renters with a fairer deal.
They assure that legislation, which will include a ban on “no-fault” evictions, will be introduced very soon.
This aims to enhance tenants’ security in their homes and empower them to challenge substandard conditions.
Additionally, they plan to establish a Decent Homes Standard for the Private Rented Sector for the first time, ensuring that privately rented properties are safe and habitable.
Of course, when the government decide what it is doing, we will let know.
In the meantime, as always, should you have any questions about the Bath buy-to-let property market, don’t hesitate to contact me.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
A packed monthly roundup start kick off the year, including some surprising facts and figures from the rental market in Bath & beyond.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
or ‘how to avoid a rental property shortage again in 2023’.
In 2022, the shortage of rental properties simply couldn’t satisfy tenant demand, driving up rents to unprecedented levels. How can we avoid this happening again in 2023? Here are 3 good places to start…
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
With energy prices soaring, rents rising and tenants feeling the pinch, a property’s energy efficiency has become so important that it can affect the rental value and desirability of a property.
The government has set ambitious targets that will require landlords to improve the energy ratings of their rental homes in the near future… so what can Bath landlords do to get ahead of these incoming regulations? What makes a good and bad EPC? And what can landlords do to improve their properties?
We have assembled a panel of expert speakers to discuss this hot topic at our second Bath Landlord Forum event. There will be a chance to put your questions to the panel and speak with fellow landlords.
We have the following speakers:
Oliver Meyer, of Meyer Energy, is a government-approved and accredited Domestic Energy Assessor operating in Bath. He will explain how property EPCs are compiled, and what constitutes a good or bad EPC.
Sonia Pruzinsky, of the Centre for Sustainable Energy, will discuss the options and funding available to landlords who wish to increase the energy efficiency of their property.
Toby Martin, of Reside Bath & ARLA Propertymark, will summarise current and upcoming EPC regulations, and other recent changes to landlord legislation.
We want to help Bath landlords to stay compliant with ever-changing lettings legislation, and provide support to make the most of your property investments.
So join us at The Francis Hotel, Queen Square on Wednesday 15th March 2023 from 18:00.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
The number of properties available to rent in Bath has dropped from 1,086 to 951 since February 2020.
The average rent a tenant has had to pay in Bath has risen from £1,409 to £2,245 since February 2020.
Many Bath landlords have cashed in on the post-lockdown property boom of the last two years and sold their properties to owner-occupiers – not fellow landlords.
The supply of Bath rental property isn’t near what is needed, which is of benefit to Bath landlords rather than Bath renters.
The Bath rental property shortage is currently very evident. In this article, I will investigate why there is such a significant lack of homes available for rent across Bath and what it means for buy-to-let investors.
Anybody who enjoys surfing the property portals (Rightmove, Zoopla and On the Market) will have observed an emerging trend that the number of properties available to rent in Bath has dropped considerably in the last couple of years.
This reduction has been seen all around the UK as well. For example, on 1st November 2020, there were 372,931 properties to rent on portals. By the 1st November 2021, that had dropped to 275,650; by the 1st November 2022, that had fallen to 171,224.
That doesn’t mean the number of privately rented homes in the country has dropped by over half. Fewer properties are coming onto the market to rent. I will explain why in this article.
For tenants, especially over the last 12 months, it has become progressively more challenging to find a rental home, thus making the rent they must pay go up. This state of affairs in the property market isn’t showing an indication of getting any easier either, making for a hard time for Bath renters.
So, what is the reason behind the Bath rental property shortage, and what does this mean for existing Bath landlords or those potential investors considering buying a Bath buy-to-let property soon?
Several different components are making the perfect storm in the UK property market.
Firstly, the number of households in the UK.
The UK has not been building enough homes for the last 20 years. I appreciate that parts of Bath seem like one huge building site, yet as a country, we are woefully undersupplied with property to live in. This has meant house prices continue to rise due to demand.
The government have known about this issue for decades. The Barker Review of Housing Supply published in 2004 stated that the UK had experienced a long-term upward trend of 2.4% in real house prices since the mid-1970s because of a lack of house building. The report stated that 240,000 houses needed to be built each year to keep up with demand.
The average number of houses built since the mid-1970s has been around165,000 per year, meaning the UK is short of 3,375,000 houses
(i.e. 45 years multiplied by 75,000 missing homes per year)
Several years ago, the government set a target to build 300,000 new homes each year to address this issue.
However, in 2019/20, the actual number of homes delivered stood at just 243,770. In 2020/21, the number of properties built dropped to only 216,000 new homes. In a nutshell, there are fewer available homes to buy, meaning fewer available homes to rent.
Secondly, Bath tenants are staying in their rental homes longer.
A Bath first-time buyer’s average house deposit is £49,592
The average rent of a Bath property in November 2022 is £2,245 per calendar month (up from £1,409 per calendar month in February 2020) – quite a rise!
These numbers translate into Bath renters not being able to pay the rent and be able to save for a deposit, or if they are saving, it is taking a lot longer to save for a deposit due to the cost-of-living crisis and higher rent costs.
Also, many Bath tenants have decided to stay in their existing rental homes because of the rent rises. Many landlords are less inclined to raise the rent on an existing property when they have a decent tenant who keeps the property in good condition and pays rent on time. Anecdotal evidence also suggests that rent arrears in those properties are dropping as tenants know if they don’t pay the rent, the chances are they will have trouble finding another property, and if they do, they will have to pay a lot for their next rental home.
For Bath landlords, this is all positive news – tenants are staying for longer in their rental properties, arrears are lower, and void periods are less likely. When it comes to the market there is less competition (because of the decrease in the availability of Bath rental properties) so this makes the investment an even better bet.
Thirdly, landlords are selling up on the back of recently increased house prices.
It would be difficult for Bath buy-to-let landlords to ignore the rising property prices in recent years.
The average property value in Bath in the summer of 2022was 12.5% higher than in the summer of 2021.
For some buy-to-let landlords, especially those who were classified as ‘accidental landlords’ (an accidental landlord is a landlord who never chose to become a landlord, it was just after the Credit Crunch of 2008/9, they found themselves unable to sell their property, so they temporarily let their own property out), they chose to ‘cash in’ on the higher house prices. This would have also contributed to the lack of available Bath homes for rent.
Yet everything isn’t all sweetness and light for Bath landlords.
Landlords have a few costs to consider before investing in buy-to-let, including everything from regular refurbishment costs, buildings insurance, letting agents’ fees, income tax, and not forgetting stamp duty.
Talking of costs, one issue some Bath landlords are facing is their failure to plan financially for the recent mortgage interest rate rises. Some landlords may have become complacent to the ultra-low Bank of England base rates we have had since 2008 and, therefore, may need to sell their rental property, which, if bought by a first-time buyer, will remove another property from the Private Rented Sector.
Another hurdle to jump is the proposed new regulations requiring better energy efficiency for rental properties. It is proposed that all new tenancies must have at least a minimum of a ‘C’ rating for their EPC (Energy Performance Certificate) from 2025 (and 2028 for all existing tenancies).
Therefore, as a buy-to-let Bath landlord, it is wise to do your research to make sure the buy-to-let opportunity is correct for your rental portfolio, particularly when it comes to weathering any impending financial storms.
Landlords need to consider the returns from theirBath buy-to-let investments.
Landlords can earn money from their buy-to-let investments in two ways. One is the property’s capital growth, and the other is the rental return (often expressed as a yield). In 96% of buy-to-let investments, there is an inverse relationship between capital growth and yield (i.e. properties that tend to go up in value quicker will have lower yields 96% of the time – and vice versa).
Getting the best balance of yield and capital growth depends on your current and future needs from your Bath buy-to-let investment.
What does all this mean for the Bath rental market?
The continued shortage of Bath rental properties means it will be more difficult than ever to find a Bath property to rent, and so rents will continue to grow.
Unlike in Scotland, England and Wales do not have rent controls, with Westminster ruling out the possibility of introducing rent control here to deal with the cost-of-living crisis.
You would think rent controls would be a no-brainer, yet economists from around the world have proved for the last 75 years that rent controls might help tenants in the short term, yet ultimately it drives landlords to sell their investments in the long term, thus reducing the stock of available properties to rent out (not great for future tenants).
Therefore, it is highly likely that Bath rentswill continue to rise for tenants.
Landlords who persevere with their Bath buy-to-let properties or become a Bath buy-to-let landlord are set to benefit because they have an asset in very high demand.
The housing shortage, not to mention the other issues discussed above that are affecting the supply of rental properties, is unlikely to be fixed anytime soon!
In conclusion, the Bath rental market is a constantly changing picture. What is known is that the supply of rental properties is far from what is needed, which can only be to the benefit of buy-to-let investors rather than of tenants renting.
I see buy-to-let as a long-term investment. Everyone reading this knows that the real value in your buy-to-let investment is playing the long game, allowing your Bath buy-to-let investment to grow over time. Like the crypto or stock market, getting sucked in by get-rich-quick schemes that are selling ‘apparent quick wins’ in property investment is very easy.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
Being a Bath landlord is undoubtedly a challenge. The glory years of making money from ‘any old property’ are certainly in the past. With increased legislation and taxation from Government and the cost-of-living crisis (which will result in some Bath tenants struggling to pay their rent), times are challenging for many landlords.
Then newspapers are full of stories of landlords being pushed into the red as mortgage rates continue to rise. A landlord last summer could have fixed their 5-year buy-to-let rate with a 25% deposit at 1.86%, whilst today the best 5-year deal is with Barclays at 4.36%. This increase will add more than £246 per month to the landlord’s mortgage bill for the average UK buy-to-let property.
Landlords’ mortgages stand at £237.81bn, meaning collectively, landlords could have to pay an additional £7.11 billion per year in mortgage interest payments.
Next, the press is reporting in Q2 2022 (when compared to Q2 2021), landlord possession claims for arrears increased from 6,997 to 18,201 properties (a rise of 160%), property orders from 5,431 to 14,319 (an increase of 164%), warrants from 3,786 to 7,728 (a rise of 104%) and landlord repossessions from 1,582 to 4,900 (a rise of 210%).
This is on the back of the Section 24 tax changes made a few years ago and ahead of expensive energy efficiency upgrades that the Government is expected to legislate for in the coming 12 months.
Doesn’t sound good for landlords.
Until you look past the headlines and look at the actual detail.
79.93% of UK buy-to-let (BTL) mortgages are interest-only mortgages (compared to 12.29% of homebuyers), meaning the repayments are considerably lower than typical homebuyer mortgages. Therefore, the rise in interest rates won’t hit landlords’ profitability as much as many thought initially.
93.21% of all new BTL mortgages agreed in the last two years have been on a fixed rate mortgage, and 73.27% of all existing BTL mortgages are on a fixed rate. So, the increase in mortgage payments will only affect one in four landlords on variable-rate mortgages.
Let us not forget that less than one in three landlords have a BTL mortgage, meaning two out of three landlords aren’t affected by these interest rate rises.
The average rent of a Bath property is now £2,065 per month, an impressive rise of 11.5% compared to a year ago.
Those possession orders mentioned above look high until you realise that there are 4.4 million properties in the private rented sector. That means only 2.04% of UK rental properties had arrears bad enough for landlords (or agents) to start possession proceedings to evict the tenant. Also, only 0.045% of tenants were evicted through the courts in a calendar year.
Talking of arrears, recent studies using statistics from the Government and other letting industry sources show that …
landlords who didn’t use a letting agent to manage their property were 272.5% more likely to be two months or more in rent arrears in 2021. It pays to use a letting agent!
Next, the potential cost of upgrading rental properties’ energy efficiency.
The proposed changes in the MEES regulations require a minimum energy efficiency (measured by its Energy Performance Certificate (EPC)) to a ‘C’ rating on new tenancies from 2025 and existing tenancies by 2028. That will cost, on average, £10,000+ per property.
Yet it cannot be forgotten when the rules changed in 2018 properties had to have a minimum EPC rating of E in England and Wales to be legally compliant. If a landlord of an ‘F’ or ‘G’ rated rental property could prove that it would cost more than £3,500 to make those improvements to their EPC rating, then that was the most the landlord had to pay. No doubt something similar will take place in the future proposed legislation.
Then there is the profitability of renting. Rental yields are the primary guide to profitability in buy-to-let.
Yields are starting to rise as Bath rental growth is beginningto outstrip Bath house price growth.
The average yields being achieved in Bath today are …
1 bed – 4.5% yield
2 bed – 4.0% yield
3 bed – 4.1% yield
4 bed – 3.7% yield
5 bed – 3.0% yield
Yet investing in buy-to-let isn’t just about the yield.
Demand from tenants plays a massive part in the success or failure of your buy-to-let investment, so other yardsticks, such as void periods, should be considered. There is no point in securing a higher-yielding rental property if that buy-to-let investment remains empty.
My research has found that the Bath overall void period average so far is 41.4% lower than 18 months ago, reducing from 29 days in April 2021 to 17 days in September 2022 (the void period being the time it takes from the date of an old tenant moving out until the new tenant moves in).
Finally, buy-to-let investment is also an excellent hedge against inflation compared to other investments. If you would like more information on that, drop me a line, as it’s too long to post here.
In conclusion, the days of buying any old Bath buy-to-let property at any price and making loads of money from it as easy as falling off a log are gone!
The next few years will be challenging for everyone. Still, with the advice and opinion of a decent Bath letting agent to guide and support you on your buy-to-let journey, buy-to-let will continue to be a profitable investment.
You need to review your rental portfolio regularly. See how your portfolio measures up against yield vs capital growth see-saw. Review your mortgage financing and EPC status of your portfolio.
If you would like a no-obligation chat with me to discuss your options as a new potential landlord or an existing landlord with a rental portfolio, then let’s talk.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
Everything you need to know about the rental market in Bath & beyond during September 2022.
This month, Toby talks about the practice of offering over asking rent, and looks at some recently introduced landlord legislation.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
The start of October has brought no fewer than three changes to regulations affecting landlords. Here’s Toby with everything you need to know.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
