2017 was a year of flux for landlords, with Brexit becoming a reality and two Budgets from Phillip Hammond dictating the future of the buy-to-let market.
As a result, the growth in buy-to-let mortgages has fallen in relation to new mortgages being granted for the first time in 20 years, with landlords looking to redeem their mortgages in favour of other alternatives.
In the last 12 months, we have witnessed landlords become the targets of increased tax regulation which has subsequently eaten away at their tax relief, alongside greater restrictions on lending, with the Prudential Regulation Authority making it harder to obtain lending to finance the purchase of an investment property. While it is not a case of a mass exodus, it is clear that the combined implications of the tax measures and movement of agency fees from tenants to landlords has led many to re-evaluate their position within the buy to let industry.
The government should be looking to maintain these landlords, who cannot be blamed for wanting to sell up and move their investment to other areas that have more competitive rates. As we lose out on landlords in the market, we will, ironically witness less rental stock being available in certain areas, leading to an upwards pressure on rents in many parts of the UK. In one of the latest buy-to-let indexes from You Move, it has been suggested that rents have increased on average at 2.4% this year.
However, rather than selling up and moving onto new ventures, landlords should consider using alternatives from the traditional high-street estate agents. There has been a boom in proptech companies in recent years, which are ultimately helping to improve the situation for landlords. Companies such as Canopy and Reposit are helping to tackle the issues of high insurance costs for both landlords and renters, streamlining the process and reducing the need for estate agents. Homestays have also become a popular alternative, with the listings on Airbnb growing by 60% this year alone.
By landlords adopting flexi-letting options through the use of sites such as HomeAway and Booking.com, they will be able increase their yield, with platforms such as Hostmakeroffering a 50% increase over traditional estate agents, alongside showcasing the property to a wider tenant audience who could be looking for a property to rent for three, 30 or 300 days.
To ensure that landlords do not leave the market, and to help stabilise the rental market, we must have greater support, or at least regulation that helps landlords as opposed to penalising them. By offering tax incentives for landlords who adopt short term or flexi lets, we will be able to broaden the range of potential tenants for landlords, while also catering to the increasing demand from tenants for flexibility in their contracts.
Nakul Sharma is the CEO and founder of Hostmaker, a technology-driven hospitality management company that specialises in managing short-term rentals for homeowners.