Property Reporter | Stuart Wilson
Last week, Chancellor Jeremy Hunt unveiled his Autumn Budget which contained much that the property industry needed time to digest.
Perhaps the headline announcement for landlords is the reduction in the Capital Gains Tax annual exemption, a move which is likely to have a visible impact on residential property sales.
Elsewhere, the mortgage guarantee and stamp duty extension suggest a government intent on improving the situation for home buyers, rather than the rental experience – despite renters accounting for 1 in 5 of UK households.
Indeed, while a 7% cap on social housing rent has been confirmed, private renters have largely been left to their own devices – some might say left vulnerable.
So, as the budget ripples begin to still, what does the landscape look like for residential landlords and in particular, Build to Rent operators?
Before the budget was announced, news of private landlords selling up and exiting the rental market began to dominate. CGT is applied at a higher rate for residential property sales, and the recent cut in the annual exemption is likely to quell these fears, with buy-to-let landlords now likely to opt not to sell.
However, given the current market outlook, it is clear that landlords will need to take action. Handelsbanken recently conducted a study which showed that 93% of landlords say economic conditions have impacted their portfolio or investment strategy – and 53% are concerned they will experience more void months.
Against this backdrop, rent rises in the private sector are perhaps inevitable, and tenants (in particular younger renters) will suffer. However, there are silver linings – particularly for the BTR sector which continues to go from strength to strength.
The UK BTR boom continues, with research from Cushman & Wakefield showing investment has almost doubled year-on-year. In Q3 2022 alone, £1.17bn was invested – a total far higher than the £600m in the identical period the year before.
Not only will BTR block managers likely not be overly affected by the changes introduced in the budget, but there may actually be an opportunity for BTR to reform the wider Private Rented Sector.
BTR projects are typically associated with high-end living – luxury services provided on-tap, multiple benefits, and a hefty price tag. This is certainly true of a portion of the market, but increasingly, BTR is coming to be appreciated for its diversity.
A new report from the British Property Federation (BPF), Dataloft, BusinessLDN, and the UK Apartment Association (UKAA) – titled Who Lives in Build-to-Rent? – has found that couples, sharers and families living in BtR homes spend a smaller proportion of income on rent compared to the general PRS.
While still a small contributor, BTR is growing, and it may have a role to play in the diversification of housing supply, thus helping to tackle some of the issues the Budget arguably did not go far enough in addressing.
In the rental market, demand is currently outstripping supply. Data from property analytics company TwentyCi shows that in September 2022, there were half as many new listings as there
were three years ago – with prices 26% higher. If BTR is cheaper, or equal in price to the PRS on average, then its continued expansion may help to alleviate pressure on housing stock.
So what other help, beyond the announcements in the Autumn Budget, can property businesses turn to? With the Chancellor finally admitting the UK is in a recession, streamlining business operations will be crucial.
As budgeting becomes increasingly important, software to assist with accounting and property management has an ever more vital role to play, with landlords and property managers seeking to keep costs down.
Forward-looking, functionality-rich tech property management solutions can assist property managers as they look to spend time prioritising services that add value to the business – cutting time, staff resources, and money spent on administrative tasks.
The property industry, like the country, is bracing itself for a period of economic decline. The UK Chancellor sought to help the most vulnerable by introducing the 7% rent cap for social landlords, and in doing so, made a worthy compromise.
While the PRS was left without a similar assurance, it is clear that the situation is not entirely gloomy – with many stressing the resilience of the UK housing market. However, it is undeniable that testing times are ahead, and using software tools to gain an edge may help weather the storm.
Source: Property Reporter
Internal News | Grosvenor Systems
PBSA News | Matthew Smith
