The last quarter of 2022 has been turbulent to say the least. The Provestor team share how they are navigating the current landscape with their own property portfolios and what landlords need to watch out for heading into 2023.
“I listen to expert commentary on the property market and interest rate predictions on a daily basis. I also meet as often as I can with experts to get their insights and predictions - mortgage brokers and letting / estate agents, for example.
“In terms of strategy, throughout 2022 I've been planning for opportunities in 2023 and beyond to help me meet personal goals faster. I’m positioning myself to acquire, keeping in mind that ‘you make your money when you buy, not when you sell’.”
“We know there has been a fall in property prices towards the end of 2022, and I don't believe we've yet reached the bottom as buyers postpone big purchases.
“Downturns eventually bring about new opportunities. Unmotivated people leave the market, while motivated people are presented with more opportunities.”
“Use the time now to make sure you understand the numbers - especially the impact of tax changes and future mortgage interest rates. Talk to your tax advisor and mortgage broker and factor those insights into assessing future purchases and rents.
“We’re all in for a tough year financially so stay close to your tenants. Try and spot early how they are coping and, worst case, if they fall behind on rent, be ready to work with them to come up with a payment plan.
“Keep thinking about the long game - stay up to date with the property sector and prepare yourself for the next opportunity.”
“I have assessed my portfolio, specifically those properties with mortgages about to end, and have been looking at the rental income they generate and if I need to negotiate with my tenants or maybe even put the property up for sale.”
“The risks I see for 2023 are around tenants’ affordability with the wider economic concerns. Though I do see potential for purchases due to pending legislative changes that may see many accidental landlords want to sell up.”
“2023 is the start of a new era for landlords. This is no longer a lucrative passive income stream but a business where keen decision-making based on quality data and professional support can make all the difference.”
“I, like many investors, am ‘seeing what happens’ in the market. Unfortunately, as time ticks on it does mean we are having to deal with whatever comes our way. Whether this be, having to stay on tracker mortgages until the economy steadies itself, or continue to pay more taxes as a result of s24 changes that are fully in effect and impacting thousands of landlords. Every investor's strategy is different, whether that be to continue to grow your portfolio aggressively, even in such turbulent times, or to diversify to in-demand products such as furnished holiday lets, Airbnb properties etc.
“The key as always is numbers. Being an accountant, of course, I have a habit of doing some quick numbers every few months to understand where my profits are headed. I’m also keeping a close eye on the market where my properties are located to understand if my buy to hold strategy still makes commercial sense. Understanding your long term goals is essential when making such decisions. You certainly don’t want to be spending thousands of pounds converting and changing your portfolio for some short term benefit.”
“In what's been a turbulent few years, we hope 2023 becomes a little more stable for both investors and lenders. As rents and mortgages have risen for landlords quite considerably over the last year, so have their tax bills.
“The potential exit by some landlords may create a surge in the BTL market, which cash-rich investors could take advantage of. Similarly, those who have already sold investment properties from their personal names could be ready to take advantage of such sellers to begin building portfolios in their limited companies.
“What is uncertain is predicting how long the recession we are in will last. How this will play out in the hands of raising inflation, and how far interest rates go to allow lenders to dip their toes back in the market with some certainty. What is clear though is that the rental market is still strong and not showing any signs of weakening any time soon.”
“My advice for landlords is not to panic and rather take this as an opportunity to review your property portfolio and understand what your medium to long term plans are.There could be some short-term pain, whether that’s higher mortgage costs, higher profits and tax, or some short-term tough decisions to make if you are considering selling/diversifying your portfolio before the Capital Gains tax free threshold dwindles away.
“I do believe some stability will return to the market with inflation already showing signs of flat rating in certain sectors. It's not clear if interest rates will ever drop to the levels they have been over the last few years, but we do expect them to steady this year which will give lenders and landlords the confidence to continue investing again.”
“I've taken the opportunity to sell a property that wasn't performing very well and take profit. There are clearly headwinds - changes to tax next year, very choppy FHL market after a boom last year. Confidence is low but people will always need somewhere to live, and the private rented sector meets a valuable need that isn't going away.”
“Yields must fall - interest rates are rising as are many (all!) other costs, but with a general squeeze on household budgets there won't be the scope to put up rents. For me this has meant selling one property, and in the past I've sold older properties where maintenance was a big problem.”
“Focus on yield and value - and think long term (assuming you are in it for the long term, which you should be.) Remember that inflation is eating your debt, and if you can hold your nerve through this cycle, you'll be in a great place on the other side.”
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