Read any news report about the property market in the last few weeks and you’d be forgiven for not realising we are in the middle of a pandemic with a recession looming, prices just keep rising.
And yet, landlords are selling and no tranche of newbies are making their way to take their place. RICS data shows in the years from 2017-19, demand for rental properties has been steady, but there has been a consistent decline in new landlords.
Hamptons data shows the number of UK landlords has hit a seven-year low and The Mortgage Works’ (TMW) Buy to Let Barometer research in April this year, found landlord confidence in the future of their letting business had fallen to record lows.
Of course, you could say this is to be expected. Landlords are in the frontline for dealing with the fallout from Covid-19 and non-paying tenants. The eviction ban and then the introduction of a six-month notice period to regain possession, along with massive court delays, meant landlords watched helpless as their assets got further and further out of reach.
Commentators popularly voice it’s all about the money – landlords are cashing in due to the tax situation and ever-changing legislation which are seeing expenses multiply and profits dwindle.
In part, I agree with this. But, I don’t think these explanations really get to the heart of the issue and the reason why the British have fallen out of love with property investment.
Control is what I really believe this is about.
Back in the early days of buy-to-let people invested for their future, for their pension, a nest egg they could sell up, a bit of extra cash on the side. Owning and renting out a property you could go and see, touch and feel, was more real than stocks and shares. Plus, with a property you also had the chance to do it up – you could add value, you could control your asset and maximise it to your heart’s content.
Of course, you could also leverage. And, unlike the stock market, the property market is not as volatile. Plus, where a stock may be worthless in years to come, a property will always be worth something – and even if prices drop – you could always go and live in it yourself.
Property, therefore, was seen as a safe bet.
But 2020 has shown us, while property is fundamentally the most basic human requirement and we all need somewhere to lockdown to, property can also be a liability.
Owning a property where the tenant is not paying rent and yet the landlord still gets stiffed with the ongoing maintenance and repairs bill is a dangerous concoction. Add to that the government stitch-up of landlords footing the never-ending bills to meet ever-changing legislation and yet not being allowed access to their asset, makes this a situation about to blow.
Who in their right mind would invest in an asset class where you have no power to make the customer pay and yet get lumped with all the expenses? No business can continue without income and only mounting bills to pay.
Landlords are now exercising the only control they have left: to sell.