Obstacles and Opportunities – Press reports suggest buy-to-let is dead… the lettings market isn’t a place for landlords or property businesses to grow and the Government is adding complication. Frank Webster says, “I believe the opposite is true.”
The next few years are going to be some of the most exciting and positive for the industry.
There are over 150 pieces of legislation, numerous Acts, licensing schemes to navigate and a plethora of compliance checks to fulfil. Barely a month goes by without some ‘announcement’. This year alone, there were eight Government consultations.
Arguably some of the legislation hasn’t been properly debated, but in truth, the industry hasn’t helped itself. This onslaught of piecemeal rules and regulation is not the fault of landlords or agents, rather the failure of successive Governments who haven’t built enough homes. The Private Rented Sector consequently expanded in a very short period.
Regulation should bring respect
Lord Best’s working party (ROPA) has now published its report to MPs with recommendations for Government on a new regulatory framework for property agents – which amongst other things will require a practitioner to be ‘licensed to trade’ – with a system of minimum entry requirements and continuing professional development.
It has also set out a model for an independent regulator backed with a legally-enforceable ‘Code of Practice’; it’s the only way the industry will ever be fully respected.
Tax squeezes have reduced income and the proposed removal of Section 21 may, for some, be the final straw; too many obstacles? Or will, 750,000 landlords switch from let-only mode? Increasingly it will be unwise to ‘go it alone’ - failure to keep up with the onslaught of legislative changes and the long overdue ‘professionalisation’ of the industry, could incur a draconian fine from Local Authorities now empowered to issue fines up to £20,000!
Therein lies the opportunity. Most practising agents can barely keep up with the barrage of changes, so how do landlords have any hope? Safer homes and potentially higher income will be possible for those who want to be part of this ‘new world’.
Research shows that in 2018 over half (59%) of landlords are aged 55 or older and one third are retired. They aspire to be diligent landlords, they want tenants to have safe and comfortable homes. Longer tenancies aren’t an issue - indeed the longer the better. At the very least they need to cover their outgoings. Otherwise, with lower projected future capital gains, frankly what’s the point?
Service and strategy
The ban on fees to tenants has focused minds but many agents are unable to provide the service that is really needed, especially the corporates who are laden with debt, low staff morale, leading to constant turnover and zero continuity for client landlords.
Unable to move quickly, they struggle to offer landlords a cost-effective way to maximise rental yields and ensure their properties are compliant.
The ‘new world’ will see agents acting more like your Independent Financial Advisor is today. They will agree a strategy with their client: when to exit; inheritance & wealth planning; effective use of equity; re-financing; budgeting and forecasting? 12 statements and ad-hoc property reports isn’t enough.
Corporate agents are shrinking services, relying instead on ‘proptech’ that no one fully uses nor understands. Landlords are consumers too, and will, I wager, pay more (for less) if they receive a service that is genuinely helpful and time saving and offers improved quality and real value.
Opportunities and responsibilities
A huge opportunity then to change the perception of the industry for both new and existing landlords. Landlords should be retaining the property wealth in the family, not running scared of regulation and qualification. They need forward-thinking agents (Independent Property Advisors) to help them survive and achieve improved returns.
Agents and landlords both have a legal responsibility to safely put a roof over people’s heads. Its way beyond just a transaction. It’s an understanding of what consumers really need. If we can do that, then the industry can be trusted and respected. The ‘us and them’ mentality that currently exists may hopefully become a thing of the past.
Key to all of this is being prepared and responsive to the policy landscape to modernise on all fronts and adapt systems, skills and services.
Safe, cost-effective ‘regulated’ letting and renting – it is entirely possible and coming to a town near you.
Frank Webster is a former vice-chair and director of Finders Keepers who now advises both property owners and businesses on adapting to change and maximising return on investment.
E: fw@frankcwebster.co.uk T: 07836592655. October 2019