Jamie’s Viewpoint – January 2022

Happy New Year! I hope you enjoyed the festive period and are now looking forward to a healthy and prosperous 2022. In my last blog, I wrote about the effect that the Government’s response to COVID has had on the housing market since March 2020. Looking forward through this year, let’s take stock of what’s happened and what the future holds.

In November, I reported that rents in Newport and Cardiff had increased by 11% and 5% respectively in the past 12 months*, and I can confirm that this trend has continued, primarily due to a lack of stock; fewer tenants are now moving and fewer investors appear to be buying and developing in these key city locations for now. The Welsh Government’s approach to legislation and regulatory measures may be putting private landlords off, and in this blog I’ll explain what else is in store. Fear not, however; South Wales is still a wise investment, particularly with a knowledgeable and professional managing agent.

The good news for now is that rents are still rising – although this could be a double-edged sword when we look at consumer inflation as a whole – and the rise in property resale values means that remortgaging and restructuring opportunities abound. Again, looking at inflation, I would sound caution on rising interest rates.

A ‘political alliance’ (definitely not a coalition according to Labour and Plaid Cymru) has been formed, and the two parties have been quite open about the fact that they are considering the introduction of rent controls, among other key proposals that they agreed to work on jointly over the summer. It is proposed that annual rent increases would be capped at the level of inflation, but it’s difficult to see what effect this would have in real terms. Firstly, our tenancy agreements only allow increases in line with the RPI anyway, and if a tenant refuses to sign a fixed-term agreement at a higher rent, you’d have to serve a Section 21 notice to end the tenancy and potentially wait 6 months before you could even start to regain possession of the property (I’ll get on to that shortly). Secondly, the RPI has surged to 7.1%, and since only the Bank of England is tasked with controlling inflation, it’s hard to see where the Welsh Government is going with this.

Notice periods for possession were increased from 2 months to 6 months in 2020 and have remained so ever since; most recently the review on this matter has been extended until late March. With the impending ratification of the Renting Homes (Wales) Act 2016 (only 6 years late), we expect notice periods to remain at 6 months indefinitely once the new range of Welsh Occupation Contracts is introduced. It’s also worth noting that caps on deposits are likely to be introduced, and we expect the cap to be 4-6 weeks’ rent; the Renting Homes (Wales) (Fees, etc) Act 2019 was rushed through in the absence of the key Act to facilitate a ban on charging tenants fees, but caps on security deposits were not included.

With the overhaul of housing legislation, we also anticipate the introduction of the Housing Health & Safety Rating System (HHSRS) in line with the four categories of fitness for human habitation, which have already been introduced in England. This means having to assess a property’s condition against 29 criteria relating to aspects such as its electrical installation, structural integrity and fire safety. If a property is deemed to be unsafe or unfit, tenants will be able to take legal action. Also, we expect the requirement for smoke and CO detectors to be enshrined in law, perhaps even going as far as the requirement in Scotland for them to be hard-wired and interlinked. We have already started to inspect all of the properties with this in mind, in line with the Rent Smart Wales Code of Practice, and will be discussing these issues with you individually in the coming months.

Please always feel free to give us a call on 0333 3447850 or email hello@redkeylets.co.uk if you need to talk through any of the points raised in this blog, or indeed anything else. As I mentioned previously, with economic and legislative uncertainty, one of the best ways you can protect your investment is with our Rent Protection Service. Click here to find out more.

* Source: Dataloft Rental Market Analytics