What's next for rental prices? Romans' property predictions

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16 Jan 2018

Despite government changes in 2017, Romans’ landlords are likely to have benefited from up-to a 2.5% growth in profits.

Author: Michael Cook

From the phasing out of mortgage tax relief, to tougher buy-to-let lending criteria and the second home stamp duty surcharge, landlords have faced a difficult few years. Yet, according to our own internal data, one in four buyers who registered in 2017, was a buy-to-let investor - suggesting that appetite for buy-to-let property has not been dampened by the government changes.

Michael Cook, Managing Director of Lettings at Romans explains: “2017 showed steady demand from tenants throughout, with August being a new record for tenant move in’s. Average rents rose steadily and although some market places remained flat, most of our locations demonstrated growth of between 1.0 - 2.5%. Couple this with the slightly reduced capital values in some locations, those who purchased at the right time, in the right area are likely to have benefitted from increased yields.

“We know that one in four of all new buyers that register are looking to purchase for buy-to-let, yet only 1 in 8 properties sold by Romans in 2017 were sold to an investor - demonstrating a clear appetite but also uncertainty from some landlords over tax implications with the increased Stamp Duty levy on second homes and the continued phasing of the removal of mortgage interest tax relief.

“After recognising that more and more landlords require support from a letting expert in order to stay compliant and make a profit, we are enhancing our investment services for landlords and investors aiming to provide more information on everything from legislation to how to better structure their portfolios to maximise their returns – watch this space for more updates to this service throughout the year.

“My predictions for this year are; whilst there will be some uncertainty, not least caused by the continuing Brexit negotiations, we are fairly certain that tenant demand will remain strong, and there will remain an underlying demand/supply gap for suitable rental property.

“We believe that with a steadying of house price inflation continuing this year, and no obvious signs of a sharp downturn in prices almost 18 months after the referendum result, investors that were sitting on the fence last year, will now commit to a purchase.

“Conversely, there may be some landlords that are reviewing their tax position given some the changes, and consider selling their property the more viable option. If this is the case, we would urge them to speak to us first before making a firm decision as, with the right advice, what at first seems an unviable investment, can turn into something far more lucrative if structured differently.

“Whilst the political landscape is unclear, and will no doubt cause inhibitions for some to make the move, we believe the rental market will continue to provide consistent returns for landlords, with no real signs of tenant demand abating. Returns may not be as buoyant as previous years, with increased rents of around 1.0-1.5% but, they are returns none the less. Tenants will benefit from an improved financial position with a slower rate of rent inflation and the introduction of legislation to regulate the industry, which we have been campaigning for as members of ARLA for some time.”

If you are a landlord and would like to speak to a lettings expert to ensure you are maximising your profits or for an up-to-date rental valuation, contact Romans on 01344 985 870. 

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