Property Market Analyst Kate Faulkner is one of a range of expert speakers addressing the RLA’s Future Renting North Conference next week. Here she shares her thoughts on what are the biggest issues on the horizon regarding the future of letting in the north.
The future of letting is a tough one.
The huge growth in the PRS was originally encouraged by the Conservatives – who didn’t want to use tax payer funding to support social housing.
The sector was then grown by Labour who wanted to increase the number of students and open up the UK to migrant workers.
Then finally, governments and MPs of all colours have failed to build enough affordable homes over the last 30 years.
Despite this, over the last five years those encouraged into the sector by government have repeatedly been told they are a cause of the housing crisis, not the solution originally planned.
The biggest threat to landlords is not understanding two fundamental facts about letting:
- Rents don’t keep up with inflation
- Capital growth is stalling
Anyone who thinks they can invest in property from an armchair in today’s PRS and in the future is likely to fail.
Those who are now investing in the north because they are struggling to make the figures stack up in the south are also in for a nasty shock; the natural capital growth they have relied on to make money in the past is highly unlikely to be repeated moving forward.
Add to this the increased cost of letting through new rules and regulations, including licensing – and adding a budget for fines for accidental or other non-compliance issues – and it is very difficult to see how landlords will make money in the future without local knowledge and expertise in investing.
I believe the landlords who will succeed into the future are those who have a proper business plan.
This means ensuring properties are bought to build in capital growth from day one, and factoring in costs such as maintenance and compliance over the next 15-20 years, ensuring rental income consistently exceeds expenditure.
The best way to achieve this, in my view, is through building to rent, be it on a small or large scale.
This allows capital growth to be generated rather than ‘hoped for’ and means landlords can build or renovate homes to maximise energy efficiency to help attract tenants and reduce maintenance costs and the danger of non-compliance.
I would like to see local authorities and the government consider tax breaks for landlords creating new homes rather than buying existing ones, and for landlords to be valued as the solution to the housing crisis that they are, rather than one of the problems.