The highs and lows of 2017

As 2017 draws to a close I thought I would reflect on the various events of 2017 from a property investors point of view. Perhaps it will allow us to learn some lessons which will enable us to improve our business or perhaps it will show a pattern to enable us to more accurately judge on what the future may hold.

As well as an analysis on a macro level it is doubtless useful to assess your business on a more micro level and to enable you to highlight your various successes and also to assess where improvements could be made.

Few sections of the property investor marketplace have been untouched in 2017. For those with tenanted investments you will no doubt be aware of the “new” Section 8 template which has been introduced which is now required in the event that you need to evict your tenant for a breach of tenancy. The revised Section 21 notice was introduced last year and so this area of legislation has seen a complete change in the paperwork required.

This year has also seen a greater focus on the HMO market place. Minimum room sizes in excess of 6.52sqm were a focus following the case of Manchester Council v Clark and there continues to be speculation about changes in Council Tax assessment for those involved in multi lets. A huge increase in supply of HMOs appears to have been matched by similar growth in tenant demand however time will tell if this will continue to be sustainable.

Another focus this year appears to be compliance in this sector. It seems that there are increasing numbers of prosecutions being undertaken by Local Authorities in respect of those who breach the HMO regulations and licence conditions.

Single lets have not escaped this regulatory focus as more local authorities have implemented selective licensing schemes and more seem keen to enforce the requirements of these through the Courts. Several local authorities have renewed their selective licensing schemes and it appears therefore that this licensing is here to stay.

Pursuant to this the new Rent Repayment Order regulations of 2017 are likely to be invoked with increasing frequency for those who fall foul of legislation.

Following the disaster at Grenfell Tower and the current review being undertaken it is likely that building compliance and in particular fire safety will be a continued focus as we move through to next year.

You will no doubt also be aware of the proposed ban in Letting Agency fees which is to be introduced as soon as parliamentary time allows. Not only will this severely impact the profitability of those involved with letting agencies, but it will likely have an upwards impact on rents, certainly if the similar scheme undertaken in Ireland is anything to go by.

For those involved in the letting market there appears to be a continued shift away from those tenants who receive benefits. Many landlords have been scared off by the rolling out of Universal Credit whilst others see no ongoing need to consider the LHA market given the enormous demand from other tenant sectors. A recent report suggested 7 in 10 landlords now decline to accept housing benefit tenants.

The continued uncertainty surrounding Brexit, the fall in the value of the pound and the inevitability of rising interest rates have meant that property buying behavior has started to change. The London market appears to be cooling considerably in some areas and some of the local areas have reported that there is less excitement in the market than was the case earlier in the year.

This year has also seen the relaunch of the Green Deal funded this time by private equity but, as before, with the aim to provide energy saving measures paid for by the savings that they create. A most timely introduction given the changes which take effect in 2018 meaning that those homes with a Band F or G rating will no longer be permitted to be let. It would be sensible to revisit your portfolios EPCs to check the position and also to check the issue date as the first of the EPCs, which lasted 10 years, expired in 2017.

A further change which has started to take effect is the so called Clause 24 or Tenant Tax to give it its media name. The concept of taxing landlords on turnover rather than profit has lead to a sea change in our operations with many looking to incorporate their businesses whilst others are seeking to deleverage their portfolio in order to maintain a positive net cashflow. Such a move could have a profound impact on our industry, meaning new entrants may be deterred from entry and  existing landlords may be forced to exit.

As I write this, the Government have just announced a further consultation on the housing market and we shall await with interest the results of that in due course.

There have been a myriad of changes to our environment over the last twelve months and I am sure there will be similar volumes of change over the next year. Armed with all this data and the continued need for us property folk to adapt and evolve it does make a mockery of the comment that property is a passive investment!

Notwithstanding, I wish you all a pleasant and relaxing holiday season and trust that you will all return, suitably relaxed and ready to face the challenges and the opportunities of 2018.