With the London rental market showing no signs of a decrease in demand since the start of the year, it is clear that despite the uncertainty of Brexit, tenant appetite remains reassuringly high. As we reported recently, we have seen this first-hand, with a steady increase in enquiries across each of our 16 London lettings branches.
However, it is fair to say that 2019 will bring a period of change for buy-to-let landlords. New regulations on fees and licensing will add to the tax changes we have seen over the last few years, and when you add the ongoing uncertainty of Brexit to the mix, it’s understandable that property investors and landlords will be looking to get up to speed with the latest changes to the buy to let sector.
To help clarify recent changes and prepare in advance, we have summarised ten of the most important things buy to let landlords should be aware of in 2019.
1. How will the rental market be affected by Brexit?
Unfortunately, the jury is still out regarding exactly who or what will be affected by Brexit. Director Marc von Grundherr shares his prediction that “rents will remain flat, which I’m basing on the fact that there is plenty of stock still to come in the lettings market in 2019 and strong tenant demand is forecast to continue”.
2. Time to remortgage?
While landlords usually need to prove that their rent will cover at least 140-145% of their mortgage payments, due to economic uncertainty some lenders are cutting this to as little as 125-130%. Meanwhile, data released by the Bank of England last year shows buy-to-let mortgage rates at 75% loan-to-value are at their lowest since 2012, when records began. Competitive 10-year fixes have since emerged onto the market, with over 1,000 products available to choose from in the fixed-rate market.
3. Mortgage interest tax relief
Cuts to mortgage interest tax relief will continue to be phased in until April 2020. Landlords will be able to claim only 25% of mortgage tax relief, as the 2019-20 tax year begins in April.
4. Cashback opportunities
Lenders are increasingly offering cashback on buy-to-let mortgages, due to the effect of base rate rises on mortgage rates. We would recommend property investors and landlords seek advice from a reputable mortgage broker if you are thinking about refinancing your portfolio.
5. Energy efficiency
From 2020, minimum efficiency standards (MEES) will apply to existing tenancies, with the Government confirming that landlords will be liable for costs of up to £3,500.
6. Minimum space requirements
New rules regarding the minimum size of ‘sleeping accommodation’ in a rented home came into force last October. The regulations are defined by how many people occupy the bedroom, and range from a minimum of 6.51 square metres for one person, to a minimum of 10.22 square metres for two. Landlords can be given up to 18 months to rectify any rule infringements, with fines for those who fail to do so.
7. Right to Rent
The Right to Rent initiative compels landlords to check whether tenants have the right to live in the UK. Through our strict referencing procedures, our applicants are also vetted against bank statements, employer references, references from previous landlords as well as carrying out a full credit reference.
8. The UK rogue landlord database
As we reported last year, the Government’s Rogue Landlord Database is now live. While take-up has been slow, we feel the database is a good thing, designed to bring more transparency and best practice to the lettings industry.
9. HMO licensing rules apply
From last October, many landlords letting shared properties in England now fall under House in Multiple Occupation (HMO) licensing rules. With the previous three-storey rule removed, any large flat or house share of five or more people requires an HMO licence.
10. Local licensing schemes
Over 60 councils in England operate ‘additional’ or ‘selective’ licensing schemes, with additional stipulations to mandatory HMO rules. Selective licensing can apply to all landlords in an area, often requiring them to conform to a code of conduct, or pass a ‘fit and proper person’ test. Examples of additions include instances in which the mandatory HMO rules are not deemed appropriate, or if they do not go far enough. Licenses can cost up to £600, with steep fines for rule-breakers.
If you are looking to enter the buy-to-let property market, we have waiting lists of referenced applicants. For further information, please contact your nearest Benham & Reeves branch.
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