Expert predictions as the new year approaches
It’s fair to say most of us will be glad to see the back of 2020. However, a vaccine being rolled out and more on the horizon, the new year, for many, represents a new start and the hope of better things to come.
While it is difficult to make predictions at any time, in the midst of a global pandemic, it’s almost impossible.
But with the new year just a couple of weeks away we have asked industry experts what they expect to see happen in the sector in 2021.
The Covid-19 crisis has put back many of the legislative changes we were expecting to see progressing in 2020 – and the knock-on effect could see them pushed back even further.
And the impact of lockdown may have a long-term effect on where renters want to live – with more homeworking and greater focus on the importance of outdoor space.
Ben Beadle is Chief Executive of the NRLA.
He said: “The new year symbolises a new beginning, and while nothing is certain we hope the country can get back to some form of normality over the first few months of 2021.
This is not to say there won’t be challenges. Many landlords have gone the extra mile to keep tenants in their homes throughout the dark days of the pandemic, but some are now struggling to keep their heads above water themselves.
Data shows landlords have lost up to £437m so far, and in 2021 we will be continuing to campaign for a comprehensive financial package from Government to support the sector and allow tenants to pay off rent arrears built as a result of the pandemic – which will benefit both tenants and landlords alike.
As 2021 progresses we expect to see some movement on legislative changes, not least on the Renters Reform Bill, which will see the Government eventually abolish Section 21 repossessions.
It is with this in mind that we have published our submission to Government this month.
The submission was put together in partnership with our landlord members, the wider sector and senior members of the judiciary and included proposals that will help landlords keep good tenants in their homes, while retaining the ability to repossess quickly where there is legitimate reason.
It includes our thoughts on the introduction of a new ‘lifetime deposit’, a key promise ahead of the last election.
As we enter 2021 we will continue to help and support landlords through these most unprecedented times and campaign for positive change.”
Property Market Analyst and commentator Kate Faulkner runs Propertychecklists.co.uk providing independent advice on how to buy, sell, rent, invest, renovate, maintain and build properties.
She said: “As we move into 2021, the expectation is that rents will probably hold next year, if not fall slightly, as people are unlikely to see wages rise in the next 12 months and this tends to dictate rents.
“Although we know we are heading into a recession, we have never seen one like this before.
“For the first time the percentage of people with a mortgage will not be too different to that of those renting. With that in mind the government has to bring forward a tenant loan scheme. Landlords can’t be expected to fund tenants living in their property for free, especially as many rely on rents for their pension.
Another way in which it is unique, is that, while a lot of people will suffer if unemployment hits double digits as predicted, some people are doing quite well financially.
This will be reflected in terms of pricing. Normally in a recession we see falls of 20% in the first couple of years. However I expect the impact on prices will vary depending on the economic circumstances of an area and those living there.
“For example if there’s a popular street where only a couple of properties come up for sale each year and it’s an area of Covid-secure employment, for example hospitals or food retail, prices may not be affected.
“In other areas, where the economy is driven by catering and hospitality, for example, some prices could end up falling by 20%.
“My advice would be, whether looking at figures on rent or prices, do not look at averages as they are not going to accurately reflect what’s happening on the ground. Instead focus on data for specific roads, as well as local supply and demand.”
Paul Shamplina, is an industry expert and founder of evictions and repossessions specialist firm Landlord Action.
He said: “I think a real indicator of how things will go in terms of economy and the market will be seen in the first quarter of next year.
“What is inevitable is the dramatic increase in job losses and unemployment once furloughing ends.
“Commercial property will probably be hit the hardest and I can see that with the planning rules as regards permitted development eased, I can see some being switched to residential use.
“I can also see some landlords looking to get back into the social sector, where they can set up longer term lease arrangements with councils, whereby the local authority is the ‘tenant’.
The six-month notice period is in place until March and I believe court proceedings will see severe delays. I expect it could take at least 12 months to get possession and the court system is going to need to change tack, encourage landlords to do deals with their tenants and bring in mediation providers in to settle disputes out of court.
Agent regulation will be coming in in 2021, which can only be a good thing.
I also believe we will see a lot of landlords selling up next year, because of fears over the repossession process and tenants losing jobs – and I think some landlords will look to sell with tenants in situ.
I think the ban on Section 21 evictions will be in place by the end of 2021 – it is inevitable – and landlords need to face reality and hope there is a major investment into the court system to make sure we get properties back.
I think we will also see landlord redress become a reality next year – meaning all self-managing landlords will need to join a scheme so the tenant has access to redress and along with this I wouldn’t be surprised if mandatory landlord licensing comes in, meaning all landlords would need to be registered and licensed as in Scotland and Wales.
I also think lenders might change their criteria.
Every sector has been impacted by Covid this year and we keep our fingers crossed that a vaccine is developed and we can back to normal, rather than adapt to the new normal.
Vanessa Warwick, is a landlord and co-founder of Propertytribes.com.
She said: “I think the only thing we can be certain of in 2021 is uncertainty! This makes it difficult to plan ahead for any length of time.
I suspect the property market will fall off a cliff from April 2021, once the stamp duty holiday ends. Combine that with an inevitable deepening of economic woes, and I think it’s likely to be a very tough year for landlords all round.
Many landlords will experience rental arrears and find they have tenants in receipt of UC/LHA, which is a whole another world for those who have never had to engage with the benefits system before.
I believe that “quality” is the best option in 2021 - quality properties , in quality locations, with professional tenants. I believe that these type of investments will be lower risk and less hassle than cheapie properties in poor locations.
On a positive note, there are many digital tools out there that landlords can use to run their portfolios efficiently, and landlords should opt for a digital solution wherever possible as this saves time, money, and can help mitigate risk, whilst facilitating efficiency.
Key data performance insights should be something that all landlords are monitoring, and it is worth considering selling off any poorly performing properties now, to take advantage of bargains that will likely start to appear following the withdrawal of the stamp duty holiday.
Cash buffers, higher net cashflow margins, and lower LTVs are the safe parameters to operate within in such uncertain times.
The pendulum has greatly swung against landlords in 2020. At some point, it will start to swing back in our favour.
Batten down the hatches, ride out the storm, and fair winds and less choppy waters will be found on the other side. Keep the faith with property - the fundamentals have not changed - but the game has. Just be sure that you know the new rules of the new economy”.
Tim Balcon is chief executive of Propertymark.
He said: “It’s been an unprecedented year for everyone and this includes the private rental sector.
The market has remained remarkably resilient despite being closed between March and May.
The supply of rental accommodation was the highest on record this year with an average of 203 properties managed per branch.
Agents also reported that the number of tenants experiencing rent hikes had fallen this year to 36%, from 44% last year, due to the ongoing impact of Covid-19 on individuals’ income and finances.
However, there are many challenges the private rental sector will continue to face in 2021.
The current ban on evictions will remain in place until the end of January, continuing to impact landlords who are dealing with ongoing rent arrears.
This will also add further pressure on the courts which are managing a backlog of cases and we expect that, when the ban lifts, there will be a delay in cases going to court.
It’s also likely that many tenants continue to be impacted financially by Covid-19 which will have a knock-on impact on paying their rent.
Brexit continues to add another layer of uncertainty to the private rented sector alongside the impact of the Covid-19 pandemic.
The ongoing Brexit negotiations and potential for a no-deal scenario could cause uncertainty in the housing market and requirements for European tenants around travel, work and rent in the UK could change, making renting difficult for many.
However, we are optimistic that housing has taken a priority in recent months. The government reopened the housing market in early May, before any other sectors, and have acknowledged its crucial role in driving forward the economy. Therefore, we are hopeful they will continue to support the market despite these challenges.”
Steve Harriott, is Chief Executive of Tenancy Deposit Scheme (TDS).
He said: “Without doubt 2020 has been one of the most challenging years for landlords ever. The combination of the Covid lockdown, the closure of courts and an increase in rent arrears has placed huge pressures on landlords.
Although many landlords have worked well with tenants to deal with rent arrears, the closure of courts and the six-month notice period now required means that these problems are set to continue into 2021.
On a more positive sign it’s clear that the demand for privately rented homes continues to be strong.
One of the risks for the Government across the UK is that landlords leave the sector, pushing up the price of rented accommodation and leading to higher levels of homelessness across the UK. It’s critical that action is taken to try to avoid this.
At Tenancy Deposit Scheme (TDS) we saw a quick recovery from the downturn in business when the lockdown started to ease in May and June of this year with deposit protection levels returning to their pre-lockdown levels.
Assuming that there is no further national lockdown in the face of increasing Covid cases I would expect that trend to continue into 2021.
We have also seen a gradual increase in the number of disputes coming to us and by the late autumn/winter these are expected and beginning to return to pre lockdown levels.
“I think it’s inevitable that as the Covid crisis continues and the recession bites with the ending of furlough arrangements that we are going to see tenants and landlords disputing more.
When times are hard every penny counts; both for landlords and for their tenants. We have recognised over many years that the best landlords are in regular contact with their tenants, dealing with issues as they arise and reminding tenants of their obligations to pay the rent and to look after the property. This needs to continue.
Here at TDS we have also recognised that the six-month notice period places additional pressures on landlords whose tenants are in serious arrears. This is why we launched TDS Resolution with the support of the NRLA to try to broker acceptable rent arrears repayment plans between landlords and tenants.
Eddie Hooker is CEO of Hamilton Fraser and mydeposits.
He said: "2020 was a landmark year for the private rented sector for no other reason than the COVID pandemic.
It will be remembered as the year the UK woke up to the realisation that private landlords have been covering up the deficiencies in social and owner-occupied housing. And how reliant the population actually is on the private rented sector.
But despite this realisation, law makers continue to pile the pressure on this supply chain without consideration for the speed of change and the goodwill being offered by landlords.
Whilst the Exchequer sought to stave off the prospect of mass unemployment – and fear of large-scale mortgage defaults and the resultant repossessions – with the extended furlough scheme, the Government ignored the reality of rent defaults and the impact on those landlords that increasingly looked to help out tenants where they could.
Landlords accepted the inevitable delays in the court system, and even the much-debated banning of Section 21, however they did not anticipate the Government’s approach to evictions caused by rent arrears.
Whilst owner-occupiers were afforded mortgage holidays and debt management services, landlords are facing huge financial losses from non-payment of rent, with the average eviction often costing them more than six months’ rent with little or no ability to recoup.
I suspect that 2021 will expose further structural weaknesses in the system, certainly up to March or even longer as the furlough scheme draws to a close. Expect fundamental changes to the eviction process and protection of renters as the economic outlook changes.
Deposit protection is due for an overhaul too, as the Government accelerates the debate over what is otherwise known as the ‘Boris Lifetime Deposit’.
How this will work in practice is currently undergoing discussions within the sector and the already established tenancy deposit protection schemes.
Expect a range of ideas from custodial only models, low-cost deposit loans dropped straight into custodial schemes and more traction for the ‘deposit replacement models’, although I expect them to move into government authorisation.
What is clear is the importance of the end of tenancy dispute process carried out by the schemes, which now includes a range of tools such as adjudication and mediation.
Importantly, these services are free to both the landlord and the tenant and offer a much less stressful experience for all concerned. I don’t expect changes to be introduced in 2021, but we will certainly have better sight of what will be coming down the line.
Insurance premiums for landlords are expected to increase in 2021 and beyond due to the huge COVID losses forecast by major insurers and their increased reinsurance costs.
Property insurance premiums have remained at low levels for several years and I expect insurers to capitalise on the current position.
The importance of selecting a reputable and recommended insurance broker cannot be underestimated, as insurers look to manage their claims processes and reduce their costs.
The impact of rising insurance costs will also have an impact on letting and managing agents as their client money protection costs will increase, as will their professional indemnity premiums. The speed of change will start to impact mid-way through 2021 and beyond.
This all sounds doom and gloom, but landlords remain resilient and long-term prospects continue to look good as the rental market is projected to increase in size over the coming years."