Podcast Transcript Summary - Episode 47
Hello, and welcome to another episode of the Essential Property Podcast with myself, Amanda Woodward, and Paul Samuda. Today, we are catching up on all the things that have taken place over the summer. Like many of our listeners, some of you have been away on a summer break, as have we, and we are now firmly back to finish Q3 and look forward to the end of the year.
We thought we would hop on and talk about what’s been happening in the last few months — in the market, in the industry, and in our business. We will cover a variety of topics to share with you the current status of the property market in Stoke-on-Trent, Crewe, and further afield in some of our new areas in Birmingham, Burton-on-Trent, and Derby, as well as throughout the UK.
Political Update
We’re going to kick off with a little bit of a political update. Every time we do a podcast, there seems to be a whole bunch of new things going on in the political sphere. So, I'll hand you over to Paul to give us a bit of an update and his musings on the riveting subject of politics.
No good news, no good news. I received an email from the accountant this morning, and there were a few items on there: four property-related and one pension-related. I emailed her back, asking for the good news, but there wasn't any. We have a new government in power, and given the history of the old government, it's probably a good thing. However, in terms of business, investors, and landlords, it is going to be challenging. We’ve said this before in previous podcasts, but it bears repeating — it's going to be tough, especially for those overseas or new to this game.
Many people have forgotten the philosophy of the Labour Government. I've been around a bit longer than most, and the Labour Government has specific philosophies about how they view the world, business, property owners, investors, and equality. This is now becoming evident in their communication. One of the first things they have done is to tax personally held properties differently. There is no more mortgage interest relief on that, and it’s capped at 20%. They've also snuck in several bits and pieces regarding how we calculate profit and capital allowances.
From April 2025, we will no longer be able to claim capital allowances on furnished holiday lettings. All in all, it’s going to make things tougher. However, I think the country has turned a corner. The first sign of this is the dropping interest rates. An economist might disagree, but from a business perspective, we want a cheap cost of money. Interest rates have dropped, and they’re suggesting we may see another two or three quarter-point drops by the end of the year. We've been stuck on a bunch of tracker rates, which we haven't been able to switch for various reasons, so we want to see those rates come down.
We’ve got some fixed rates coming to an end. I was speaking to a colleague whose fixed rate finishes at the end of January. It puts a lot of pressure on, especially if you’ve had a fixed rate of around three percent and now you’re looking at six and a half percent or more for an HMO. That’s a big jump.For example, I had some family tenants who have been with me for a while in one of the properties in Derbyshire. I increased their rent by about £130, and, needless to say, they weren't happy. However, I sent them a simple spreadsheet explaining that once my fixed rate finishes, I will not make any money at the current rent. Plus, when I do my tax return, I’ll have to pay HMRC more, which means I’m losing money on this property. Therefore, they had to pay more rent. We eventually agreed on a rate, and I assured them I wouldn't increase it for the next two years. I am working on the hope that interest rates will come down within that period. They are happy to have a fixed rate for two years, and I’ll take advantage of falling interest rates when it comes to renewing my two, three, or five-year fixed term.
So, all in all, I don’t think there’s any great news on the political front for us. The new government is talking about building more houses and relaxing certain planning consents, such as the requirement for properties to look identical if you are converting one in a row. Let’s see how that pans out. It’s still early days; they haven’t even been in power for 100 days yet. We've got the dreaded budget coming up in October, and that’s where a lot of the pain is likely to be felt. They might use it as a political stunt, announcing horrible things that turn out to be less severe than anticipated. As we always say, think long-term with property rather than short-term.
Legislation Updates
Moving on to legislation, the Renters Reform Bill, or the Renters Rights Bill as it’s now known, brings a few changes for landlords. Should we talk through a couple of those, Paul?
Absolutely! It’s essentially the previous bill with a few modifications. Section 21 is definitely going; they’ve renamed it the Renters Bill because they’ve shifted from a middle-ground stance to firmly siding with the renters. This move is about giving the bill more teeth. While the Tories shied away from making definitive decisions, Labour has made it clear they’re on the renters' side. This means landlords will have to work harder to make their properties profitable, remain more compliant, and manage increased tenant protections.
However, with these changes, there will be landlords who choose to sell up. This will reduce the number of available rental properties, increasing demand and, consequently, rents. So, while it seems like a one-way street, there are opportunities for landlords who manage their properties well and adjust their strategies accordingly.
The Labour Party has stated they will not introduce rent controls but are considering rent caps. It’s unclear what this means, but it seems likely that landlords may face restrictions on how often and by how much they can increase rents. We need to navigate these new rules carefully.
I still maintain that HMOs probably offer the best value in this changing environment. HMOs attract a more transient population, which allows for more flexibility in rent adjustments. We’ve found that our HMOs are consistently in demand, especially when they offer quality accommodations. There’s also talk about new legislation that would allow tenants the right to buy from private landlords, which could be concerning. While this has been discussed in the past, we’re waiting to see if it will be seriously considered.
There will be more clarity after the October budget, and we’ll provide a follow-up once we’ve assimilated all the information. It’s going to be interesting times in property. Some are selling, some are digging in, and others see opportunities in development rather than just buy-to-let. We’ll have to see how things play out.
Market Trends and Predictions
Amanda, what are your thoughts on the current market trends?
The buy-to-let market is indeed struggling, and I think it’s all but gone as a profitable strategy for new investors, especially if you require a mortgage. However, if you have owned buy-to-let properties for a long time, like we do, they may just tick over in the background. For new investors, it’s a long journey to build a portfolio that reaches a significant monthly income.
I agree. The key is to look at property investments over the long term. Property has always been a solid investment, even with a few years of pain. For those looking to build wealth, focusing on developments rather than traditional buy-to-let might be the way forward. We need to think beyond the short-term fluctuations and plan for the future.
Case Study: Batterson Project
Let's talk about the Batterson project, Amanda.
Certainly! For those who have been following our Batterson journey, you know we have made significant progress. The project, now known as One Batterson, has been open for over a year. We have a few more rooms to complete, and we’re currently in the final stages of plastering and second fix. Once completed, we’ll have a range of stunning rooms ready for tenants, with rents as high as £750-800 per month.
The project has been a learning curve but overall, a great success. It taught us a lot about the importance of quality design and compliance, particularly around insulation and fire safety. We’re now well-equipped to take on similar large-scale developments in the future.
So, that’s it for today’s episode. We’ve covered political updates, legislative changes, market trends, and our ongoing projects. We hope you found this discussion valuable and that it gives you insight into the current property landscape.
If there are any specific topics you’d like us to cover in future episodes, please reach out and let us know. We’re here to keep you informed and help you navigate the property market. Thank you for listening, and we look forward to sharing more with you in the next episode!
To get in touch with Paul and Amanda directly, please visit our website at www.essentialpropertyoptions.co.uk.
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