property investment

In truth we are in the midst of an impossible situation with concerns about a second wave of the coronavirus, which is already sweeping through mainland Europe. As a consequence, the UK government has pushed back eviction hearings until 20th September 2020. On one side we have continuous support for private tenants while on the other private landlords appear to have been set adrift and left to “fend for themselves”. Are we moving towards an inevitable collapse of the UK private rental market?

Why is the government not offering rental assistance to private landlords?

There were always going to be “bumps in the road” as the UK economy fights to get back to anywhere near normality after the initial Covid-19 outbreak. Protection for private tenants has not been replicated for private landlords and many are piling up additional mortgage debt having been forced to take “mortgage payment holidays”. Just as private landlords appear to be edging towards somewhere near “normality” the government has continuously pulled the rug from beneath them. Surely it is time to give private landlords at least partial state assistance for the millions of pounds of lost rental income?

Additional six month extension to wreak havoc

In tandem with the announcement that eviction hearings have been pushed back until 20th September 2020, the UK government has introduced yet another delay. Landlords will now be required to give six months’ notice on evictions which will have a huge impact on those looking to exit the UK market. It is highly unlikely any property investor would be willing to take on tenants on the verge of eviction, and likely not fulfilling their rental obligations. So, those private landlords looking to reduce their exposure to the market and sell assets could be locked in until at least March 2021.

How will the UK property market look in six months?

Recent property price data from the Nationwide Building Society shows that UK property prices rebounded in August and now stand at an all-time high. This recent bout of strength in the UK property market has shocked and stunned many experts who yet again predicted a short sharp collapse. However, January 2021 will see the UK government paying employers an additional £1000 per employee retained during the pandemic.

It is no surprise to learn that many believe unemployment in the UK could increase significantly once these payments have been received. The economy is rebounding but there are still challenges ahead, employers are still looking to cut costs and the UK government is under constant pressure to bail out various parts of the economy. Therefore, if the government is unable to assist private landlords with rental income support today, it is unlikely the situation will improve in early 2021.

Exceptions to the eviction ban

In what can only be described as a “modest” success for private landlords, the government has confirmed that some eviction activities will be prioritised once hearings resume. It is believed that those involving antisocial behaviour, criminal activity and where landlords have not received rent for more than 12 months will be heard first. There is also talk of an additional exception described as “where private landlords would otherwise face unmanageable debts” which may be headline grabbing but is very non-specific.

Even if landlords who are facing financial distress are prioritised with their eviction proceedings these actions won’t happen overnight. To be eligible for an early eviction hearing they would need to be in significant financial distress – from which many will never recover.

Summary

While there is growing pressure on the UK government to protect private tenants and reduce homelessness, private landlords appear to have been set adrift, again. Yes, many of these investors have made significant returns over the years but only as a consequence of under-investment in housing stock by the UK government and local authorities. The “right to buy” scheme introduced by the Conservative government in the 1980s is widely believed to have lit the blue touch paper for homeownership in the UK. On the downside, local authority housing stock has never recovered, leaving private landlords to fill the gap.

Who will fill the gap when private landlords leave the market?

Read our previous article about Coronavirus and the property market here.   

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