Brexit uncertainty impacts on house prices, COVID-19 global recession, new changes on HMO licensing—it’s a tricky time to be a landlord.

The buy-to-rent market has become increasingly tough for landlords over the past few years but 2020 has exacerbated things—with a raft of new rules and regulations being implemented to rebalance the property market.

Industry experts have warned that the new changes could push things harder for landlords, to the point of making some leave the sector. But what impact will these changes have on the buy-to-let landlords? Dive in to find out.

1. COVID-19 and House Prices

Britons have become accustomed to expect rising prices. After all, house prices have increased five folds since 1950, faster than any other OECD country.

But things are set to change. In 2020, the COVID-19 pandemic will elicit a short term stasis; buying and selling will all but stop. As a matter of fact, it has indeed stopped—in April alone, Zoopla reported a 40% drop in inquiries.

The product choice for borrowers will plummet resulting in rising interest rates which will be a blow to landlords considering investing in rental property. And it’s happening; data from industry sources show that asking prices for houses has risen since the property market reopened on May 13th. Landlords are also improving their current locations with designer gardens and bathrooms including unique tiles and top rated toilets. That said, if you’re looking to sell your property fast, you’ll want to leverage the services of sites such as sellhousequickly.co.uk for a hassle-free cash purchase.

2. Changes to Private Residence Relief

A revision of the property residence rules and regulations will introduce a high capital gain tax that will hit landlords hard when they sell their property.

Before April 2020, you were entitled to up to £40,000 in capital gains tax relief if you let a property that you’ve been living in. But this rule has now been scrapped and landlords will need to be living in the property in shared occupancy with the tenant to qualify for this relief.

3. Stamp Duty

Since 2016, landlords have had to pay a 3% stamp duty on every buy-to-let property they invest in. The government is looking to extend the tax to cover a wider scope of the property market.

Rumor has it that the new stamp duty surcharge could be brought in for foreign buyers investing in the UK property. UK landlords should keep an eye on this development as it will impact property prices if implemented.

4. Energy Efficiency Rules

Since April 2018, landlords have been required to achieve a min. rating of E on the Energy Performance Certificate (EPC) for all new tenancies and tenancy renewals.

Starting April 2020, these laws have been revised to include all existing tenancies. This means all rented properties will need to meet a minimum energy efficiency rating of E. Properties with an EPC rating of F or G will be classified as “unrentable.”

5. HMO Licensing & Planning

Any landlord looking to buy a property with the sole intention of creating a house in Multiple Occupation (HMO) will need to abide by the new HMO directives.

Under the previous rules, landlords could turn a home into a small HMO with up to six occupants with no additional licensing. The new policy changes, which are currently being enforced by many local authorities, require all HMOs with more than seven occupants to have planning permissions.

The Bottom Line

With the current and ongoing changes in the property markets, it’s more important than ever for buy-to-let landlords to keep an eye on the latest developments in the rental market.

Terry Clark
Author: Terry Clark

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