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What to expect in the rental market in 2017

3 January 2017 / By: / Under: News

Chancellor Philip Hammond’s Autumn Statement contained some key points for landlords, tenants and the rental market, from announcing the decision to place a ban on letting agents’ fees for tenants ‘as soon as possible’ to choosing not to reverse the additional 3% stamp duty surcharge on second homes.

The housing shortage and the ongoing uncertainty as a result of the EU referendum are the main challenges for the property industry as we move into 2017.

Market activity has been slowing in London, and we predict growth to be slightly subdued in 2017. However, the fall in the value of the pound, low interest rates and London’s reputation as a safe haven for property investment will ensure that investor interest remains strong, especially in prime central London markets.
What to expect in the rental market in 2017

Prime Minister Theresa May has stated she will trigger Article 50 by the end of March 2017. This will kickstart the formal negotiation process. Throughout this period of negotiation, uncertainty will remain, and this could mean lower levels of buyer and vendor activity.

What can landlords expect in 2017? We will receive further details on the ban on letting agents’ fees for tenants in 2017. This ban could mean higher costs for landlords, despite speculation in the immediate aftermath of the Autumn Statement that landlords could shift these extra costs onto tenants through higher rents.

Landlords have had a tough year in 2016, and it may not get much easier in 2017. Taxation changes and greater mortgage regulation have proved challenging for landlords. April 2016 saw the introduction of the extra 3% surcharge for buy to let investors, and from April 2017, mortgage interest will cease to be deductible on rental profits, though this will be phased in more slowly, while the wear and tear allowance for landlords has been scrapped. The Treasury has also given the Bank of England additional powers to limit the size of loans as the buy-to-let mortgage sector is seen to pose a risk to the financial system.

If landlords cannot absorb higher costs, they may move out of the buy-to-let market, while potential investors may choose not to invest. This will limit the number of new properties entering the rental market. However, it will make it easier for landlords to ensure good rental yields.
London remains an excellent place in which to invest in property. The market has shown its resilience in the face of uncertainty, while continued investments in London’s transport links (Crossrail and the night tube, for example) will open up more options for landlords in terms of where to invest in property.

What can tenants expect in 2017? Tenants can be pleased with a proposed ban on them having to pay letting agent fees, but in the long-term, tenants may lose out. The government has introduced many measures designed to slow the buy-to-let market. In 2017, therefore, we may see fewer landlords entering the market. For tenants, this will mean fewer options in terms of rental property. At a time when there is a huge demand for rental property, a shortage may push up rents for tenants.

For those tenants who are renting but want to get a foot on the property ladder, affordability remains an issue until more homes are built. The Autumn Statement did reach out in support of first-time buyers, with the extension of the Help to Buy Scheme. The rental market will remain busy and perhaps become increasingly imbalanced in terms of supply and demand.

The long-term outlook remains positive. Rents may increase, but there will always be demand for rental properties from landlords. Brexit will continue to cast its shadow, but overall, we expect a continuation of what we have seen in the last months of 2016.

As a landlord, you may need the guidance of a good lettings agent to ensure the success of your investment. Contact us today.

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