Buy-to-let  

Buy-to-let landlords need to ‘freeze rents, not tenants’

D J Fatica Asset Management’s director, Dan Fatica said “across the board” his clients have reported achieving rents in excess of forecasted figures.

For example, the bridging finance and property investment firm’s portfolio in South West Wales has seen a 20 per cent increase in rents since the onset of the pandemic.

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“This signifies that the market remains in a state of undersupply and this doesn’t look like it's slowing. Rent rises are driven by the undersupply of good quality housing and multiple bidding parties when good quality safe accommodation becomes available,” Fatica said. 

In relation to interest rate rises, Fatica pointed out that it is good practice for landlords to “stress test” their current rentals at a rate of 6 per cent - a historic norm before the global financial crash. 

“The challenge comes for landlords who are coming to the end of their fixed-term and moving on to variable rates. Which from even the most competitive lenders, are up around 5 or 6 per cent. 

“We will soon see who’s been swimming naked in the tide of near 0 per cent rates”, Fatica said.

Responding to the comments from Renters’ Rights London, Fatica said he does not see fixing rental income as feasible. This is because “buildings need routine upgrades and maintenance - the costs of which cannot be fixed”.

“The vast majority of landlords take pride in providing safe, ethical housing for their tenants. Of course, like anything, a few bad apples spoil the reputation.

“Fixing rental income is a one way path to deteriorating housing stock, and a glut of slumlord style properties.

“My practical suggestion to tenants is to offer a long term rental agreement to landlords to fix their exposure, more recently landlords have been motivated by long term commitments from tenants, stretching to two or even three years. 

“Not dissimilar to rental increases keeping pace with the market, employees salaries don’t keep pace with the market. Workers that move jobs will benefit from larger pay increases, assisting with the burden of increased living costs. This could be something to consider but obviously very specific to the individual tenant,” Fatica said.

EPC ratings

Another area of concern for landlords is the regulations around energy efficiency, with a proposal in place from the government that from 2025 all new rental properties should have an EPC rating of at least a C.

In March, Aneisha Beveridge, head of research at Hamptons, said: "The policy will mean that the average tenant will eventually pay lower energy bills than the average homeowner, although it’s likely to remove some rental homes from the market, putting further pressure on stock levels.