What does 2017 promise for the residential property industry?

See here what Relo predicts for the property and lettings market for 2017.

1) Rents will rise by the highest rate for 5 years

Evidence from Relo leads us to believe this could be a 10% in the Midlands for 2017. Less new landlords are buying many having being put off by the 3% stamp duty surcharge and inability offset all mortgage payments against rent for tax purposes. This lack of supply balanced against continuing immigration is creating the highest rental price growth I have seen in my 14 years in the sector.

2) More Landlords will incorporate

Many accountants are already organising transfer from personal names to Ltd company en masse using Section 162 Incorporation relief to avoid CGT and Schedule 15, Paragraphs 18 & 20 of the 2003 finance act in order to avoid SDLT.

3) More landlords will shift moving higher yielding assets

such as HMOs and serviced accommodation to pay for increased government taxes and regulations.

4) Legislation likely to change

meaning all 5 or more person HMOs are likely to be licenced regardless of how many floors they have (currently only 3 storey HMOs require licencing).

5) New prudential regulation authority rules

After an initial flurry to meet new Prudential Regulation Authority rules on buy to let lending many Mortgage lenders have set their rent stress calculations at 145% and 5.5%. We are already seeing some lenders enter the market with lower criteria and 2017 goes on I believe some will relax this a little and we will see new lenders with lower criteria take market share.

6) Letting agents will start to change the way they collect fees

With proposed legislation banning fees being taken from tenants many letting agents are preparing themselves to change systems to ensure they are ready to comply with this legislation. With the new rules not set in stone a dilution of this initial headline grabbing proposal seems likely.

Many letting agents are also looking to the Scottish model where tenant fees are already banned and in many cases letting agencies have managed to maintain their fee income by restructuring it.

7) A lack of housing supply

A lack of housing supply will continue to drive price growth in the South East and regions as people continue to move out of and less choose to move to London such is the price differential. With more choosing to live outside and commute into London prices in the regions are likely to grow. I expect 5% price growth in the South and Midlands for 2017.

8) Prime Central London is likely to continue to fall in price

All £1000/ft+ price areas still need to experience further adjustment such is the now huge stamp duty payable on sales at this level and disparity between the value of properties in these areas and those outside. The new Stamp Duty regime does seem to have completely gummed the market up above £1M, some sort of change to SDLT at this level seems likely. If there is no action on this front in 2017 pressure on the government is likely to build through the year.

9) The housing white paper is likely to be released this early year

With promises that the government will be taking “unprecedented steps to open up the market” in order to tackle the housing crisis in order to deliver 1M new homes by 2020 this document could be as big a shift to developers as the 1988 housing act was to the private rented sector. A more relaxed planning system is good for those building and converting – But Lets see if this is another big headline that is short on results in reality as we have seen so many times with successive Governments who seem unable to tackle this issue.

10) More small buy to let portfolios will become available

More small buy to let porfolios will come available from landlords who are unable or unwilling to incorporate thus transfer to a Ltd company to avoid new taxes. This will reduce the private rented sector further meaning larger incorporated landlords are going to have more choice of tenants and buy to let properties to purchase, possibly at discounted prices in bulk.