Here is Property Options’ latest update on the UK Buy To Let (BTL) market – for November 2018.
This update is by economist Chris Worthington, who is a regular PIM speaker.
New Developments in Housing Policy
Removal of the Cap on Borrowing by Local Authorities
At the conservative party conference the Prime Minister announced that the cap on borrowing by local authorities for council housing will be abolished.
This has been widely welcomed by local authorities who have been quick of the mark to get new funding in place. However it is too early to say how much new social housing will be built and within what timescale.
Government Consultation on Longer Tenancies
In July 2018 the Department for Housing, Communities and Local Government (DHCLG) published a consultation document entitled “Overcoming the Barriers to Longer Tenancies in the Private Rented Sector.”
Here is a summary:
The assured shorthold tenancy was introduced in the Housing Act in 1988. It allows for a minimum tenancy of six months and is the most common form of tenancy in the private rented sector (PRS). The short initial term period can result in tenants feeling insecure and that their house is not their home.
Landlords could benefit from longer tenancies. An empty property does not generate income and finding new tenants incurs costs. Furthermore, where tenants know that they will be living in a property for a longer period of time they are more likely to look after the property.
A model tenancy agreement which landlords and tenants can use as the basis for longer tenancies is included in the government’s consultation document.
Implications of the Policy Developments for BTL Investors
In time the removal of the cap on borrowing for housing by local authorities will increase the availability of council housing, with rents that are likely to be lower than full market rents in the PRS.
Council housing is also likely to be available for tenancies that are longer than an assured short tenancy in the PRS .
Government policy is moving in the direction of longer term tenancies although no legislation is so far in place. In order to compete in a market where social housing will become more widely available, landlords should consider if the benefits of a granting a two or three year tenancy outweigh the risk.
A longer tenancy could be good selling point for a new tenancy and it has the benefit of reducing uncertainty about the possibility of voids and future increases in rents.
Our Next Property Meeting
We will all be discussing the latest position on the property market in Bristol and across the UK at our next PIM on Thursday 29 November 2018 at Future Inn, Bristol, BS1 3EN.
We hope you will join us then.
For more info and to reserve your place Click Below