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The private rented sector isn’t shrinking – it’s changing with the times, and so should you

Recent research from Countrywide draws attention to a significant drop in the number of residential landlords in the UK over the last two years.

At first glance, this seems to add weight to fears that the private rented sector is currently no place for investors or tenants. (Recent changes to landlord taxation and agency regulation have put pressure on property portfolios as well as housing availability and affordability – the twin legs of the long-running housing crisis.)

More than meets the eye

But look deeper and you might agree it’s not bad news at all. While some landlords are dropping out, rental stock has in fact increased, Countrywide’s numbers show.

The estate agency group estimates that “the number of landlords peaked at 3.72 million in 2015, when there were some 171,000 fewer rented homes than today. In 2017, there are just over 154,000 fewer landlords (3.56 million in total), but the number of rented homes has increased from 4.9 million in 2015 to 5.1 million today”.

The only explanation is that portfolio sizes are, in fact, increasing, the research concludes.

But who are these landlords that are so confidently taking on more properties while others are bowing out (or biting the dust) due to changes in mortgage interest tax relief, higher stamp duty for landlords and tighter mortgage criteria?

Also, where is the rental stock coming from, as the tidal wave of conversions into Airbnb short lets threatens to lay waste to UK housing stock?

The rise of the professional landlord

The common thread is a long-overdue trend in the market – the emergence of professional landlords.

“Increasing regulation in the sector, accompanied by recent changes to income tax relief on mortgage interest payments, seem to be favouring more experienced, professional landlords,” explains Johnny Morris, research director at Countrywide.

What might this new variety look like? Are they any different from the so-called ‘accidental landlords’ dotting the UK rental landscape (who never meant to become landlords and often haven’t built up the necessary knowledge to manage an investment property)?

One fairly visible type of professional landlord is the institutional investor with  government backing for a new wave of build-to-rent (BTR) schemes. BTR brings high scalability to rental developments, and has the potential to significantly add to the country’s house-building capacity, thus reducing pressure on the rental market and housing in general.

But whatever they look like, professional landlords also inject much-anticipated standards of tenure and business conduct into the rental sector, which is a boon for tenants and the broader housing market.

Move with the times

These market shifts have serious implications for landlords and agents alike, says Neil Cobbold, COO of PayProp UK, a bank-integrated online payment platform that automates agencies’ rental payment receipts and reconciliations.

“One thing is certain – as we proceed down this path of professionalisation, the dynamics of running a modern estate agency will change: dealing with 200 landlords who own one property is different from dealing with 20 landlords who own 200 properties,” he says.

Cobbold says as the government introduces further regulations, the industry’s survival will depend on its ability to change with changing requirements.

“Innovative property technologies offer a proven means to achieve agility and move with the times: Just as technology is able through agile principles to change and flex, so the property market – enabled by technology – can learn to flex and change to remain relevant,” he concludes.

 

 

 

 

 

About PayProp

What can our platform do for you?

PayProp is a bank-integrated online payment processing platform for the lettings industry.

By automating bulk payments and reconciliations it unlocks efficiencies and reduces error in agents’ back-office systems, allowing massive portfolio scalability. The PayProp dashboard provides at-a-glance visibility of business health with drill-down views per property into who paid, who still needs to pay, commission earned, void properties and much more. Automated reminders allow proactive arrears management, and regular reports and statements keep landlords in the know. On average, PayProp clients grow their portfolios by 23% annually.

Watch our video to learn more.

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