2024 is shaping up to be a year of significant change for UK landlords. From rising rents to the implementation of new laws, landlords are facing a landscape that’s both challenging and evolving. Let’s break down the key aspects that landlords need to be aware of in the coming year.

Mortgage Rates Increase

Landlords have been hit with increased mortgage rates, a trend that started last year. Reports from Hamptons estate agents show that landlords are paying 40% more in mortgage interest compared to the previous year. This spike has significantly reduced profit margins for many, especially those with mortgages on their rental properties.

Rising Rents

However, there’s some relief. Rents have been rising rapidly. The HomeLet rental index indicates that over the past two years, rents on new tenancies have increased by over 20%. This increase has helped offset some of the mortgage costs, especially benefiting those who own their properties outright.

Legislative Changes

Energy Efficiency Plans Scrapped

The government has reversed its plans to require landlords to upgrade the energy efficiency of their properties. Previously, there was a push for rental properties to achieve an EPC rating of C by 2028. For now, the requirement remains at a minimum EPC rating of E, unless exemptions apply.

The Renters’ Reform Bill

A significant development is the introduction of the Renters Reform Bill into Parliament. This bill, if passed, will grant renters new rights to challenge rent hikes and substandard living conditions. It represents a major shift in the private rental sector, potentially altering the balance between landlords and tenants.

Capital Gains Tax Changes

Landlords should also be aware of changes in capital gains tax (CGT). The annual exempt amount was reduced to £6,000 in April 2023 and will further drop to £3,000. Profits exceeding these amounts from property sales will attract a tax rate of 18% or 28% for higher-rate taxpayers.

Looking Ahead to the General Election

The upcoming General Election in late 2024 will be crucial for landlords. Housing policies proposed by various political parties could bring more changes to the sector. Landlords are advised to stay informed about these developments.

The Renters’ Reform Bill

The bill proposes several changes, including:

• Enhanced tenant protections against ‘backdoor’ evictions.
• A shift to a system of periodic tenancies.
• Possible end to ‘no fault’ evictions, subject to the court system reform.
• Labour’s commitment to implement these changes regardless of court reforms.

Decent Homes Standard Review

The government plans to impose a legal duty on landlords to meet the Decent Homes Standard. Failure to comply could result in criminal charges. This includes maintaining properties to a decent standard and providing necessary facilities.

The Financial Strain on Mortgaged Landlords

Many landlords are transitioning from low-interest mortgages (around 2%) to rates closer to 6%. This increase significantly impacts their profit margins. The National Residential Landlords Association (NRLA) found that two-thirds of landlords expect mortgage payments to rise further.

Rising rents across the country have helped mitigate some of the financial strain. The average UK rent has seen a 20% increase, which has somewhat offset the impact of higher mortgage rates.

Falling Mortgage Rates

Recent months have seen a decrease in mortgage rates, providing some relief to landlords. The Bank of England’s base rate is also expected to be cut next year, which could further reduce mortgage rates.

House Prices and Landlord Exits

While there were concerns about a housing market crash, prices have remained stable. Predictions for 2024 suggest a potential decrease in prices, but this remains uncertain.

Since 2016, landlords have sold more properties than they’ve bought. This trend is expected to continue due to increased mortgage costs, regulatory changes, and tax burdens. The average age of landlords is also a factor, with many reaching retirement age and choosing to exit the market.

Conclusion

Landlords in 2024 face a complex set of challenges and opportunities. From legislative changes to financial pressures, staying informed and adaptable will be key to navigating this evolving landscape. Whether it’s adjusting to new mortgage rates, understanding legislative changes, or making strategic decisions about property portfolios, landlords will need to be proactive to thrive in 2024.