The buy-to-let market has had a turbulent 12 months, with many changes, including tax measures which came into force this April.
Landlords have also seen the proposal to ban letting agent fees, with a view to stopping tenants being hit with extra upfront payments along with their deposit and rents. Tenants’ fees will be outlawed and there are also plans to cap the amount of deposit that a landlord is allowed to take. Tenants would just be asked to pay their rent, alongside a refundable deposit with no hidden extras. Whilst this is seen as a positive measure by many sectors, others argue that agents will simply raise rents to cover the lack of fees. It has been suggested the average tenant would have to pay about £103 a year more in rent because of the changes. What is clear is that many sectors are calling for clarity in the rental market.
The National Landlords Association head of policy, Chris Norris, is among those calling for certainty. The government has published its proposals on letting agents’ fees but has hinted that there are other areas it might look into at a later date. This just adds to the uncertainty. UK Association of Letting Agents executive director, Richard Price, says small letting agents are being swamped by constant policy interventions. He argues that it shows the government does not have a clear vision for the future. It seems as though the government should talk with landlords and letting agents to work out a clear future, rather than constantly moving the goalposts or introducing changes bit by bit.
Despite this lack of clarity, landlords are feeling more optimistic than 18 months ago. Buy-to-let investors are developing strategies to soften the impact of tax changes in the market. Paragon Mortgages’ PRS Trends Report for the first quarter of 2017 found that 78% of residential landlords interviewed now understood the implications of tax relief changes being phased in from this new tax year. This is up from 71% in the final quarter of 2016. Just 7% of landlords felt they did not understand the implications, which is down from 11% in Q4 2016. However, as the tax relief changes are being phased in, it will take a couple of years for the full impact to be felt. That said, landlords are feeling more confident than they were last year.