If you’re an expat planning to relocate to the UK, it’s helpful to stay informed about the latest rental housing market trends and understand the relevant legislation to ensure a successful transition. This article provides an overview of the current UK property market as well as insights into applicable legislation and protocols.
The rental market in the UK has seen some significant changes in recent months, with a cooling of the sales market and an easing of pressure in certain areas. However, there are still challenges for landlords that are impacting the rental market, including the inability to offset mortgage expenses against rental income and increasing legislative costs and responsibilities. In this blog post, we will discuss the current state of the market, the impact of the Renters Reform Bill, and provide some tips for landlords and tenants on the tenancy set-up process.
Current State of the Rental Market
- Demand remains strong for smaller properties in central London and other urban locations, but the supply and demand gap has narrowed for family homes and higher-value properties, leading to a reduction in competitiveness in these markets.
- The recent rising cost of borrowing has hindered purchases, causing first-time buyers to hold off on their purchases and remain in rental properties. This has reduced the supply of rental properties, which has pushed up rental prices. This has also caused rental markets to become more competitive, making it harder for tenants to secure rental properties, especially in popular urban areas.
- Landlords are facing pressures such as the inability to offset mortgage expenses against rental income, potential increases in borrowing costs, and increasing legislative costs and responsibilities. Landlords have been raising rents to cover their reduced profitability, leading to higher housing costs for tenants. Some landlords have decided to sell their properties, while others have avoided further property investment, which has limited the availability of rental housing.
- The shelving of government plans to enforce minimum energy efficiency standards on rental properties is a positive development for landlords, as it would have incurred significant costs. This u-turn may convince some landlords to retain their rental portfolios.
The Impact of the Renters Reform Bill
- The Renters Reform Bill, currently at the committee stage in the House of Commons, is expected to come into force in the near future.
- One of the major features of the bill is the abolition of Section 21 notices and fixed-term agreements, which will require a change in the structure of agreements and consideration of all AST documentation. The abolition would provide tenants with increased security and stability in their tenancies, as landlords can no longer carry out “no-fault” evictions.
- The bill will only be applicable to Assured Shorthold Tenancies (ASTs). High-rent agreements (where the rent is above £100,000 per year) or corporate tenancies will not be impacted.
Tenancy Set-Up Process
- Landlords are legally obliged to comply with the Money Laundering Regulations 2017 and the Proceeds of Crime Act 2002, and will require certified ID and proof of address for all permitted occupiers over the age of 18. This should be a current address, not a serviced apartment or temporary accommodation.
- Additional information may be requested during the process, particularly if a tenancy is in a company name.
- Referencing is separate from the AML and Right to Rent checks and is used to check the tenant’s financial viability and ability to afford the rent.
- For Right to Rent checks, landlords must check the immigration status of anyone over 18 who will be living in the property as their main and principal home before handing over the keys. A usual process is, if the tenant has an electronic visa, to give the letting agent their share code (generated through the government website) and date of birth. After receiving a PDF from the government website, the letting agent must either video call or see the tenant in person to compare their likeness to the PDF picture and confirm it’s the same person.
In the coming months, the demand for smaller properties is expected to remain stable, and the rental market will continue to be competitive and fast-paced. However, for larger properties, demand is anticipated to remain lower, returning to relatively normal levels compared to the last few years.
By staying informed, expats relocating to the UK can ensure a seamless transition into the country and make well-informed decisions to secure comfortable and appropriate housing.