Assessing both the short-term situation and the long-term outlook is crucial for property investors to make the most profitable decisions with their assets in the coming year.
Predictions on what lies in store for the UK housing market over the course of 2023 vary widely from source to source, highlighting the fact that there is little certainty at the moment as to how the sector will react to things like high (but hopefully decreasing) inflation, rising interest rates and regulatory changes.
The property market has certainly been buoyed by relatively low unemployment levels, as well as high demand in the market matched with supply shortages in some area keeping transactions moving quickly.
Property investors who let their homes out have also seen unprecedented levels of enquiries from potential tenants, demonstrating that stock in the private rented sector is also constrained at the moment. Yet there are many factors at play that could either improve or worsen the situation this year.
As ever, the property market is an investment space where looking to the long-term is key. Those who invest now may be unlikely to ‘flip’ very easily for a higher price a year down the line. But property investors who buy now, rent out their home in the high-demand environment, and reassess in five years will see a very different outcome.
Tips for property investors and landlords
Tom Entwistle, a residential and commercial landlord since the 1970s and founder of LandlordZONE, has revealed his opinion on what the best course of action might be at the moment for property investors and landlords, based on his wealth of experience in the UK housing market.
He points out that property investors who “stay the course” will remain the ones who make “real money”, adding: “Unless you have a good reason for selling up, my advice would be to stick in and see this through.”
Entwistle also sets out his top four strategies that property investors and landlords should employ in 2023 to remain successful:
- Making sure your properties are in good shape, especially hanging on to those placed in good rental locations, meeting the requirements of your tenant market, keeping them well maintained and complying with the energy efficiency and safety standards, as required.
- Good tenancy management, whether you do it yourself or you use an agent to do this for you. This involves good tenant selection, treating tenants as customers and with respect, and dealing with problems in a professional way.
- Being knowledgeable about the rules and regulations, which is particularly important if you self-manage, but you also need to keep a watching brief if your properties are managed for you by agents. On the whole, agents do a great job, but some don’t. The landlord – agent relationship can be difficult, a bit like that between Major the pig and the hens in Orwell’s Animal Farm – in a breakfast of ham and eggs the pig is committed, the hens are merely involved!
- Knowing how to deal with problems when they arise. One thing that makes the life of a landlord interesting is the sheer variety of problems that come up in tenancies. No two issues in tenancies are alike I find, so you need all the knowledge and experience you can get to deal with them.
Important considerations for UK housing
For those who rent out their investment properties, it is important to keep an eye on the Renters’ Reform Bill that is currently being consulted on. It is expected to be introduced this year, although it may not be finalised before the end of 2023.
This means there is time for landlords to get to grips with any potential changes that could affect them. The changes in the Bill include extending the ‘Decent Homes Standard’ to the PRS, scrapping assured shorthold tenancy agreements, removing Section 21 evictions and allowing landlords to make only one increase to rents per year.
Another thing to keep a close eye on, which is being highlighted more and more both in the mainstream press and in the way homes are marketed, are the potential changes to the minimum requirement for energy performance certificates (EPCs) in rental homes.
At the moment, it looks like the minimum rating might be raised to ‘C’ for new tenancies in 2025 and for all tenancies from 2028, although it is still going through the House of Commons. Nevertheless, property investors who future-proof by investing in top-rated homes are likely to see this pay off in the long run.