Buy-to-let looks to a strong future – Birmingham Post article 03.02.2022

It’s a mixed picture for buy-to-let landlords.

The rental market has been strong but legislative challenges are making life tougher.

Meanwhile the pandemic has seen fast-moving and fluctuating consumer choice.

In areas outside London, rents rose by six per cent in 2021, their fastest rate in 14 years, according to property website Zoopla.

The driver has been a shortage of rental homes coupled with tenant demand for bigger properties given Government entreaties to stay away from the office and the consequent boost for those with a garden and space for home working.

Though, as the pandemic recedes, this could reverse as early indicators suggest a return to city living is a likely trend now restrictions have been removed.

Too early to perceive what the full effect will be.

More generally, Knight Frank predicts “strong upward pressure” on rents.

Rental values fell steeply in the capital and the Home Counties as Covid struck, but are expected to return to previous levels within two years.

By comparison, larger cities and towns in the regions have held up well.

One factor behind this positivity is the lack of supply, a reflection of tax and regulatory changes.

In 2021 landlords bought 184,100 properties, equal to a market share of 12.3 per cent, according to analysis by Hamptons. But investors also made up 13.4 per cent of vendors last year, selling 201,300 properties.

The sector has been losing more investors than it can attract since 2016, when a three percentage point stamp duty surcharge was introduced for additional properties.

An intriguing development is the growth in purpose-built and professionally managed rental homes, likely to benefit bigger operators, not so good news for small-scale landlords. Such units typically come with extras that minor players cannot compete with, such as gyms and meeting rooms.

While these tend to be pricier, many tenants prefer the higher level of service and accommodation.

Knight Frank’s Suburban Build to Rent Housing Report 2021 suggests that the last 12 months have seen a rapid acceleration in the volume of capital looking to enter this niche, with £7.8 billion earmarked for deployment within the next five years.

Jack Hutchinson, an associate in the Residential Capital Markets team at Knight Frank, said: “There is a clear opportunity to increase the delivery of purpose-built rental housing and bring the benefits of institutionally-managed products to more renters – particularly young families – and investors are taking advantage of this.”

Local examples are 2 Snow Hill Plaza in Birmingham city centre which real estate investment manager Mark and residential developer Hub have acquired and Goodstone Living’s Camp Hill Gardens at 193 Camp Hill, Digbeth, former home of engineering group Sulzer, both schemes predominantly apartments.

Meanwhile, from April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year, and available 140 days a year, to access small business rates relief, where they meet the criteria, required to produce evidence such as the website or brochure used to advertise the property, letting details and receipts.

Previously, some owners could avoid paying council tax and access small business rates relief by simply declaring an intention to let the property out to holidaymakers, at an estimated £110 million cost to local councils in England and Wales.

Secretary of state for levelling up, Michael Gove, said: “The Government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.

“However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.”