What’s Next for the Rental Market in 2018? (Expert Roundup)

Is it just us or do you find it an uphill struggle to keep up to date with the changes in the rental market? It’s a fast-paced market and every year we see many changes. The last thing anyone wants is to be landed with a tax that they haven’t had the time to properly prepare for in advance. Many property owners and landlords get caught out every year with new changes that could have been avoided if they knew about them just that bit sooner.

To make sure you don’t get caught out, we asked some of the top industry leaders what their predictions are for the rental market in 2018. And here’s what they said:

1. Freezing Indexation – The Big Thing Not to Hit the Headlines Yet

Property journalist Sarah Walker, who has contributed to many leading property magazines and blogs, talked about the importance of the freezing indexation from January this year.

“One big thing that doesn’t seem to have hit the headlines to any great extent is the freezing of indexation from January this year – something that will affect landlords who are continuing to buy and own their investment properties within a company structure.

The ‘indexation allowance’ is a tax relief available to businesses that offsets the effect of inflation over time on capital gains. When companies sell an asset, HMRC supplies a figure that relates to the period of time it has been held, specific to the month and year the asset was bought. The original purchase price is multiplied by this figure and that amount is deducted from the gain, with the remainder liable to corporation tax.

The effect on incorporated landlords who already own property is that there will be no further relief from January – although historical relief will still be applied when they sell. But for landlords who buy property within a company from now onwards, the full capital gain will be liable to corporation tax when they sell, so they’ll need to rework their figures to make sure property is still going to give them the return they need, when they need it, and decide whether it’s still worth buying through a company.

As an example:

For a property bought today and sold in the future, the tax bill will be considerably larger and therefore the capital growth landlords are able to walk away within their pocket, potentially considerably smaller.”

2.  Pro-Activity is Essential to Survive – A Message to Amateur Landlords

Vanessa Warwick, residential landlord and co-founder of PropertyTribes.com explains that landlords will have to prepare for change and to educate themselves in order to survive.

“I think the one thing landlords should prepare for in 2018 is change!  There are many changes happening in the private rented sector that is not only changing the game but also moving the goal posts!

These include increasingly legislation, more onerous taxation, and more regulation.  Landlords are going to have to professionalise their business and raise their game in order to stay on the pitch.

Those that do not get pro-active and educate themselves will likely not survive the next few years. Margins are going to be decreased, meaning landlords have to have a much better understanding of their cash flow and how their business is going to perform, not only in the near-term but also the longer term, especially if they are affected by the Section 24 tax changes.

2018 will see the start of the demise of the amateur/accidental/dinner party landlord.  The golden days of BTL are over … for the time being.” 

3. A Dramatic Increase in the Demand for Rental Property

Private landlord, investor and property entrepreneur Landlord XX says that despite continued Government onslaughts, there will be plenty of positives for property owners in 2018.

” Continued tax and regulatory onslaught by the Government. Higher interest rates. S24 eating into or wiping out profits. PRA making lending difficult or impossible. On the plus side: increasing demand for rentals and a tightening supply of rental accommodation, so higher rents. Rising house prices as fears over Brexit etc subside. Continued rapid population growth. that’s my thoughts for starters.

4. Big Changes are Expected on HMO Licensing Rules

According to Tessa Shepperson, owner of one of the most famous property blogs ‘Landlord Law’, big changes are expected to happen on HMO licensing rules.

“If it’s renting out rooms then the HMO regulations will be critical.  These are likely to change in October making more properties liable for licensing”

Need to rent out your spare room? It all starts by placing an ad on Easyroommate. Check out our Ultimate Beginners Guide to Renting out a Room which covers everything you need to know about renting out your spare room. Good luck! 

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