What landlords should watch out for in 2024

By Allison Thompson, national lettings managing director, Leaders Romans Group

2024 will be a year to watch for landlords, especially those who are self-managing, as there will likely be many changes and new announcements that will affect how landlords operate.

In addition to the Renters (Reform) Bill making its way through Parliament, we have a Budget to look forward to in March, and there is set to be a General Election at some point during the year. So, as the Conservatives push ahead with their plans to reform the private rented sector, landlords need to be aware of what could be on the horizon if Labour comes to power in 2024.

Mortgage rates

A big concern for landlords is the cost of mortgages, which tend to move up and down in line with the Bank of England base rate. The rate of inflation can greatly influence this, as we’ve seen over the past two years.

While inflation fell in November to 3.9%, December saw a slight rise of 0.1% up to 4%. Capital Economics (CE) predicts that inflation will drop to 2% between April and October this year, and go as low as 1.3% by the end of 2025. CE believes the base rate has peaked, having hit 5.25% in August 2023 and remained there since. CE expects the base rate to drop by 0.25 basis points at every meeting of the Bank of England starting in June before reaching 3% in 2025.

Recently average mortgage rates fell to 4.79% according to Rightmove. Rightmove is predicting mortgage rates will remain flat for most of 2024. And as lenders’ confidence in the economy improves and they continue to compete for business, hopefully, 5-year fixed deals may become much more attractive. That will help existing landlords who are remortgaging and should encourage some much-needed new buy-to-let investment.

For existing landlords, especially those with multiple properties, the increase in average capital values since the pandemic’s start may have significantly boosted equity. If you haven’t had your properties valued recently, it’s well worth doing so now, as you may be able to remortgage and use some of that equity to make new investments. Ensure you secure an accurate valuation from a qualified agent, as online tools will be too generic for investment valuation purposes.

Tax

In terms of tax, there’s good and bad news. Some landlords could benefit from Class 2 National Insurance being scrapped and the rate of Class 4 contributions falling from 9% to 8% in April. However, the current freeze on Income Tax bands and the Personal Allowance means that those landlords who have managed to raise rents by more than their costs have increased could be paying tax on a higher proportion of their income.

If you plan to sell property in 2024, the tax-free allowance for Capital Gains will halve again in April, dropping from £6,000 to £3,000 – although this isn’t a huge burden. It will cost 20% taxpayers a maximum of £600 extra and higher-rate taxpayers up to £1,350, which shouldn’t make too much of a dent in the profits you’ll likely have made over the years.

The final thing to consider that could affect your finances is the cost of administering any changes that come in during the year. For instance, if Section 21 is scrapped, new rental agreements may need to be issued.

What will affect property deals?

The forecasts are that 2024 will be a similar market to last year. Rightmove predicts that average new seller asking prices will be 1% lower nationally by the end of 2024, while transaction levels are expected to stay at around the 1m mark, around 200,000 lower than the long-term average. That means well-capitalised investors who can offer motivated sellers a quick deal should be able to find some bargains – and cash buyers will be king!

While most areas are likely to be a buyers’ market, certainly in the first part of the year, things do tend to pick up each spring, so we may see a busier market with more competition between March and May. However, we don’t yet know what might be in the Chancellor’s Spring Budget that could change confidence and affect finances and deals.

And if the General Election is announced for later in the year, the sales market may slow again, as people who don’t have to move wait to see what the outcome might mean for them. In that case, those who can buy could benefit from there being much less competition for the properties out there.

Will rents rise or fall?

The outlook for the rental market is good. Most forecasters expect strong rent growth to continue, although at a slightly slower rate than we’ve seen over the past couple of years, as inflation and wage growth calm.

Having risen above the inflation rate this year (according to ONS data), average UK rents are predicted to grow by 5%-6% in 2024, with the five-year outlook being cumulative growth of around 20% or even slightly more. So, if inflation settles back to around the 2% mark from 2025, landlords have good rental profit potential.

At the same time, the Government’s financial boost for those on the lowest incomes should mean landlords are at less risk of their tenants falling into arrears. From April next year:

  • Local Housing Allowance will be increased to cover the lowest 30% of local rents, giving around 1.6m households an average of £800 a year in extra support
  • Benefits in England and Wales will go up by 6.7%
  • The minimum wage will increase by just over a pound to £11.44 an hour for those aged 21+

With the gap between tenant demand and suitable available rental stock likely to widen, landlords who can offer good quality accommodation in the best areas should do very well regarding occupancy and rental income over the next few years.

What could change about the business of letting?

The most significant changes on the horizon are those proposed in the Conservative Party’s Renters (Reform) Bill and Labour’s Renters’ Charter. While there are differences between the two and a change in power at the General Election could certainly derail the Renters Reform Bill (if not enacted at that stage), both parties are pushing for the abolition of Section 21, with Labour’s Angela Rayner recently stating that if they were elected, they would “implement a full and immediate ban” on no-fault evictions.

The potential consequences of landlords no longer being able to evict via a S21 notice include:

  • Having to give tenants more than two months’ notice to leave
  • Losing the ability to apply for an ‘accelerated possession order’, meaning every challenged eviction could end up in court
  • An end to ASTs and every tenancy agreement simply being periodic, with tenants able to leave at any point giving just one month’s notice – i.e. landlords would no longer have the security of a fixed rental period

In reality, we don’t think it’s likely that S21 will be abolished this year, despite Labour’s bullish pledge. The Conservatives have already stated that they’re not going to move ahead with it until the court system has been reformed, and the issue is still being debated in Parliament, with elements being strongly protested by industry bodies.

Material information

Most likely to change in 2024 is the ‘material information’ that must be provided in property listings for both sales and lettings.

Over the past few years, the National Trading Standards Estate and Lettings Agency Team (NTSELAT) has been working on new guidance for sales and letting agents, which also applies to landlords who carry out their own marketing.

Part A of the guidance came into force in May 2022, requiring all property listings to include the price/rent, council tax and tenure. Then, in November 2023, Parts B and C were published, with Part B requiring information to be provided about the property type, construction type, number and type of rooms, utilities and parking. Part C relates to issues that must be disclosed if the property is affected, including building safety, restrictive covenants, planning permission, development proposals and flooding.

So, if you use an agent to market your rental property, ensure you have provided them with any of the information they might need to comply with the guidance. If you advertise your property yourself, check the NTSELAT’s helpful guide to ensure your listing is accurate. The changes are expected to be reflected on all property portals by the end of 2024.