Is now a good time to enter the rental market?
As a landlord, you may already be aware of the Tenant Fee Act which came into effect on the 1st June 2019. This post details the main changes impacting the market and the points you need to consider to ensure the effective management of your rental portfolio.
For those unaware, the introduction of the Tenant Fees Ban restricted the fees that can be charged by letting agents and capped deposits to a maximum of five weeks’ rent, as opposed to usual deposit of six weeks’ rent, usually taken by landlords.
During Q1 and Q2 of 2019, we noticed the market was unusually slow and believe this was down to most applicants waiting until this Act came into force before moving, unless they absolutely had to. Due to this, we experienced an increase in landlords exiting the market and an overall reduction in supply of rental property. Unsurprisingly, when fees were eliminated the number of applicants looking rose dramatically and the increased interest has not yet slowed – the amount of tenancies we have commencing in October 2019 has increased by 77% compared to October 2018. Rents have also increased from this time last year by approximately 2.5% on average (area dependent), this is likely to be caused by the decrease in supply of rental property and increase in demand.
The performance of the rental market changes seasonally, with the summer months being the busiest period, and autumn and winter months typically being slower. So far in 2019, we have not seen this change and the market continues to be active as we head towards the end of October. This is again likely linked to the Tenant Fee Act with applicants starting their search for a rental property later in the year than usual.
The reduction in deposit amounts has introduced deposit alternative schemes to the industry. There are various schemes available, and Watsons use one called Zero Deposit Scheme. This option allows tenants to decide between putting down a standard deposit of five weeks’ rent or purchasing a guarantee from Zero Deposits. It’s worth noting, tenants remain liable for damages but the money due for dilapidation’s simply comes from the guarantee rather than a cash deposit. The money guaranteed by Zero Deposits is the equivalent to six weeks rent, ensuring landlords get the same amount of protection as before. We use the Zero Deposit Scheme as it is regulated by the Financial Conduct Authority and insured, meaning our landlords would remain to be protected even in the worst case scenario. If you are choosing to go down this route, it is worth ensuring the scheme used by your Letting Agent is regulated and insured so your risk is minimal. Find out more about the Zero Deposit Scheme.
Finally, with the Lettings Market changing and adapting constantly the most recent talks include the abolition of Section 21. A Section 21 notice of possession or Section 21 eviction is the notice which a landlord must give their tenant to begin the process to take possession of a property let on a short-hold tenancy, without providing a reason. This is the most common way of terminating a tenancy so for many landlord’s this news is concerning. The reality is the use of Section 21’s is uncommon. The Government consultation so far has mostly been focused on updating the Section 8 Notice. A Section 8 notice is the next alternative to a Section 21, which allows notice to be served so long as there are grounds in which to serve it – usually served if a tenant is always in arrears with the rent. The consultation looks to add more legal grounds to the notice, including if a landlord wishes to sell or if it is required back for family use. In case anything does change with Section 21’s it is worth considering the quality of your tenant to minimise any risk and make sure all relevant documentation is served at the start of a tenancy in the correct manner. This should be an important factor when choosing a Letting Agent – Watson’s are members of both ARLA Propertymark and The Guild of Property Professionals making us one of the only trading standard approved Letting Agent’s in Norfolk.
If you are a landlord, now is a very good time for your rental property to be entering the market. Please do feel free to contact us if you have any queries in relation to the recent legislative changes bought to the Lettings market and we will be more than happy to help. You can contact us on 01603 751555 or email@example.com