Landlords still on top
Landlords could be forgiven for feeling a little brow-beaten.
Over the last 12 months, we have faced:
Landlords have avoided Labour’s proposed rent controls thanks to the surprise general election result. Although the electorate succeeded in seeing sense just in time, it came as warning; and the spectre of rent controls still looms large in London, where Labour’s Mayoral candidate Sadiq Khan is proposing the Berlin model of rent control if he gains power.
Although the election result dodged rent controls, the new Tory government stung higher rate tax paying landlords with an unprecedented tax bombshell – the removal of mortgage interest rate tax relief.
We have spoken in depth about the serious implications of these changes.
Increasing controls and a changing legislative framework
Just as landlords were left reeling from the tax bombshell, they have also been blasted by the latest piece of regulation requiring them to fit smoke alarms and carbon monoxide alarms in certain circumstances. There are new and additional fire safety regulations in their rental property.
The new Section 21 Notice is just about to be released and there is also a requirement to give tenants the Government’s new Right to Rent Document.
Landlords under pressure?
All the above would make any landlord question why bother renting out my property. However, let’s just rewind a second and remind ourselves of a few home truths.
1. We live in an uncertain world.
Just look at the turmoil in financial markets around the world as bubbles in commodity prices and investments in China implode. Property prices despite the financial crash prove to be resilient (even if they have been propped up by Government stimulus both fiscal and monetary – interest rates and help to buy). House prices are now almost back at the pre-crash record highs.
2. Rents continue to grow
Despite there is more rental property and more landlords then ever before, rents continue to rise.
Increases in rents are maybe not at the alarming rate that some politicians would have us believe, but are still progressing at a pace that suggests a strong demand for rental property.
3. Pension crisis looming.
The financial crisis that will top all experienced so far will be the pension crisis. I’ve been saying for years that all politicians have not been honest with us. They promise bullet proof pensions to an ever increasing and militant pensioner class. At the same time the reality is a reducing working population and low to non-existent rates of economic growth. Added into the mix is the dramatic increase in life expectancy.
All this doesn’t add up. Where is the money going to come from? It can’t last and at some stage somebody will have to pick up the bill by either accepting lower and less generous pensions (as is the case in the private sector) or much higher contributions and a later retirement age. My pension like many landlords is tied up with my buy-to-let portfolio. I’m therefore not reliant on some half arsed politician telling me something that is not true.
Interest and finance costs remain low
Global economic growth and confidence remains fragile and landlords remain one of the prime beneficiaries of this as the government aims to keep the economy from slipping back into recession. Long may it continue and with the global economy teetering on the edge I can’t see the low rate environment disappearing any time soon.
Landlords are in the driving seat
So despite all this head-wind, landlords remain in the financial driving seat. We own an appreciating asset with strong demand from an increasing number of customers (tenants). There are threats from Government in terms of increased regulation, but, unless we believe that Jeremy Corbyn is electable, then there is nothing that will fundamentally undermine our business.
Clearly, there will be landlords that have more successful business models, or those that execute their business more effectively and successfully than others.
However, personally as a landlord with a small to medium sized portfolio of between £1 – 1.5m, I feel comfortable that my destiny is in my hands. I’m still in the driving seat. How many of the millions of the salaried lackies can say the same?