Will There Be A New Year’s Revolution In The BTL Market?

Tim Newman

Head of Marketing

Zephyr Homeloans

WILL THERE BE A BTL MARKET REVOLUTION THIS YEAR?

As I write this we’re now well into February, so I wonder how we’re all doing at keeping up with those New Year’s resolutions? No doubt some of us made grand plans to join a gym, eat more healthily or avoid alcohol for dry January. Whilst I’ve failed at least two of those, I have made a good start with my own resolution – to reconnect with long lost friends this year, having recently attended a big reunion party with 30 old school friends.

Things are similar here at Zephyr, with our Regional Sales Managers and Business Development Managers reconnecting with more brokers this year, through office visits, events and webinars. We’ve been particularly looking forward to getting out to some of the PMS Extra Live events in March. If we’ve not seen you in a while, we hope to do so soon! As ever there is a lot to talk about…

In the wider economy, cost of living increases has driven inflation to over 5%, base rate rises are predicted and headlines about energy price rises are focusing minds and tightening wallets. For landlords, there are fears of increasing rent arrears from struggling tenants and potential issues with delayed eviction court hearings. However, at the same time we’ve seen sustained demand for rental property leading to rising rents and increasing property prices.

Set against this backdrop, it is challenging to make forecasts about the buy to let (BTL) market for the year ahead! But with that big caveat in mind, there are two key regulatory changes expected in 2022 which could certainly have a significant impact on the sector. Renters’ Reform Bill

In October 2021, the Government confirmed that its long-awaited white paper on rental reform would ultimately be published in 2022 – with the aim of ‘professionalising’ the private rental sector. The paper is expected to herald a reform of possession rules (abolishing Section 21 and Section 8 notices) and will consider the benefits of introducing mandatory redress schemes for landlords, together with a national landlord register and lifetime rental deposits.

Whilst there is ongoing debate about the merits of the Renters’ Reform Bill, there is little doubt that the changes could potentially cause a dramatic shake-up in the market. We don’t know exactly how this will pan out, but The National Residential Landlords Association summed this up by describing the proposed reforms as “In short, the biggest changes to the private rented sector for a generation” (NRLA, October 2021).

DISCOVER Green EPC legislation

As we all know by now, at some point in 2022 we expect to see binding legislation introduced that will increase the minimum Energy Performance Certificate (EPC) rating for all new tenancies from an ‘E’ to a ‘C’ by 2025, and for existing tenancies by 2028. This will be just one part of a much wider set of environmentally conscious policy changes touching every area of the property market.

At Zephyr, we responded initially by releasing a range of discounted products for properties rated EPC A-C, to encourage and incentivise landlords to invest in more energy efficient properties. They’ve proven popular, but we’re also aware that these products will be out of reach for some landlords, unless they spend money enhancing their older/less energy efficient properties. It will be fascinating to see how these two big regulatory changes play out over the course of 2022, as there still so many moving parts yet to be finalised. Whilst it’s hard to predict exactly what will happen, we could see a ‘New Year’s revolution’ in the BTL market, creating challenges for some landlords but also opportunities for others.

Education, awareness and planning will be key for landlords – so at Zephyr, we will watch these developments and ensure we provide timely guidance and information to support brokers who use the PMS Mortgage Club.

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