Is now the right time to add to property portfolios?
Bob Hunt is chief executive of Paradigm Mortgage Services
Looking gift horses in the mouth has never been a particular trait of private sector landlords over the last half a decade, probably because those gifts have been few and far between.
Which is perhaps why the opportunity to save stamp duty on purchases, up until the end of March 2021, has been seized upon as a potential catalyst for a raft of investment purchases over the next seven or so months.
The big question of course is whether landlords will feel now is the right time to add to portfolios, regardless of whether they can make a significant stamp duty saving?
For what it is worth, it does seem that advisers are seeing an uptick in buy-to-let activity and I am aware that our BTL lender partners have seen strong business levels throughout the summer.
It may well be that landlords are getting their financial ducks in a row to be in a position to purchase, perhaps remortgaging existing properties in order to release the equity required to fund deposits.
But I also suspect that some landlords will be looking at the current post-lockdown situation and wondering whether adding a new property right now is the right decision to take.
Perhaps they have existing tenants who have been unable to pay their rent and perhaps they will also be put off by the government’s recent decision to extend the ban on repossessions and the fact that they need to provide tenants in arrears with six months’ notice if they want to evict them, also up until the end of March 2021.
It is a challenging time for many, and it seems important to me that the government does not overlook the fact that landlords are also challenged greatly by this situation.
The overwhelming focus, quite rightly, has been on safeguarding tenants’ rights, but this should not really be the case for problem tenants, who may not just be causing distress to the landlord’s ability to pay their mortgage, but potentially the property itself, the neighbours and the authorities.
Underlying all of this, is a recognition by landlords of the importance of helping tenants keep a roof over their head, and there has been plenty of cases where landlords are doing just that.
According to Shelter, 227,000 renters have fallen into arrears as a result of the pandemic, and it’s vitally important that everything is done to ensure they are supported.
However, landlords also need to know they can secure access to their properties if they have problem tenants, and it is actually vital to a sustainable PRS as well.
How many landlords would wish to keep letting property out, or purchasing more property, if this fundamental right was seen to be watered down?
It appears to be further evidence of the need for a joined-up approach in housing areas because let’s be in no doubt that without a working PRS, many millions of people are going to be left with nowhere to live.
On the one hand, the government is providing this stamp duty incentivisation to landlords to increase PRS supply, but on the other, it is effectively ensuring that property investors are having to second-guess what their rights might be, and whether the investment is worth their time and money.
I understand the unique situation that Covid-19 has delivered, but if we truly want to boost the number of properties in the PRS, and I have no doubt that the government do want to do this, then it may need to rethink the overall strategy.
When the repossession ban ends on 20 September we may have a different environment though, if greater certainty can be delivered, coupled with the stamp duty saving, I have no doubt landlords will be motivated even further to add to portfolios, and advisers will no doubt benefit from what is an increasingly competitive mortgage market and a greater need for advice.