I’m a property professional: Here’s why small landlords can be ‘eradicated’ over the subsequent SIX months

Property is a favourite British conversation topic. Nearly everyone has an opinion on where house prices are heading, the next property hotspot or where homes should – and shouldn’t – be built.

But to get a true sense of what’s driving the market, it is worth listening to the people who live and breathe property day in, day out.

In this series, we put a property expert through their paces each month.

We want to know their view on all of the hot-button topics mentioned above as well as mortgage rates and the future of buy-to-let. We will even question them about their best and worst property investments to date.

This month we spoke to Nicholas Austin, branch manager of South West and Central London at estate agent RiverHomes.

Nicholas, has vast experience working in residential property, particularly in riverside postcodes.

He is also a Freeman of the City and a member of the Company of Watermen and Lightermen.

RiverHomes is a specialist waterside real estate agency that exclusively sells and let waterside properties within the M25 – be they houses, flats or houseboats.

What will house prices do over the next 12 months?

Right now we effectively have two separate markets in London: the flat market and the house market and they’re on different trajectories. 

We’ll continue to see modest price growth for houses but the flat market has been depressed since 2015 for multiple reasons including increased stamp duty, foreign investment stamp duty, increased taxes for landlords and a fall in demand for flats after Grenfell. 

I can’t even place the blame entirely on the current government for this situation as Rachel Reeves’s tax rises and the introduction of the Renters Rights Act merely added more nails into an overnailed coffin.

What about the next 10 years? And why?

We will see the widening gulf between flat and house price growth becoming an unfathomable chasm. 

Over the next decade, we will see a 25 per cent growth in house prices but flat prices will only go up 5 per cent at most unless there is structural change.

Where will mortgage rates be in 12 months?

Little more than a month ago I would have said that there would be a half percent cut over this year but with the Iranian conflict ongoing, who knows.

If the situation is resolved soon, then rates might fall. As we all know, Trump has a habit of getting bored and wandering off. 

If I was going to put a finger on it, I predict that mortgage rates are just going to be held for the rest of the year so the lowest deals will probably be similar to the ones available now.

What mortgage do you have? 

I’m on a two-year tracker at 4.47 per cent tracking at 0.72 per cent above base rate (3.75 per cent). 

I’ve been on one for three years as I’ve been betting on interest rates coming down after the Kamikwasi budget. 

I thought I was winning that bet until last month. However, I think the era of one percent base rate is never coming back. Mortgage rates will settle between 2.5 and 3 per cent. 

What is the biggest current property related crisis in your opinion?

People go on and on about a housing shortage but that is not the case in London. We don’t have a supply issue; we have an affordability issue. It’s not about building more, it’s about making them more affordable. 

There are over 10,000 people on the housing waiting list in Wandsworth because they can’t afford a home. 

If you make homes more affordable, you will decrease the housing waiting list because more can afford to buy a home of their own. No one goes out in the morning and wants the council to give them a house. 

People want their own home, but since 2001, housing in London has become so unaffordable that few can afford to buy. 

Solve the affordability crisis and the demand for social housing will fall. Make housing more affordable and build the right type of properties – three and four bedroom family homes, not two bedroom flats – and the overcrowding issue will be resolved, as well.

What do you view as the biggest threat to rising house prices? 

High unemployment and low wage growth are the biggest threats. 

People are poorer today than they were two years ago and most are poorer than they were 10 years ago. 

Successive governments have failed to increase productivity and personal wealth. 

Another decade of the same will only exacerbate the situation we’re in now. 

What do you think will be the biggest change that the property market will see over the next decade? 

The eradication of small landlords is a timebomb that will go off in about six to twelve months. 

The Renters Rights Act will end small independent landlords with one or two properties because they operate on small margins. 

They can’t afford the mortgage if the tenant doesn’t pay their rent. 

The Act will have the exact opposite effect on what this government intended: there will be a reduction in the number of properties which will see rents increase. 

Bidding wars are now banned so agents are front loading rents by up to 30 per cent. This will put more pressure on social housing where there is already a shortage. 

Is buy-to-let by-and-large bad investment these days?

Buy-to-let is generally a bad investment but houses rather than flats can still be profitable. 

You tend to get more family oriented tenants which means fewer issues with non-payment of rents. 

The taxes on landlords have gone up across the board but at least you’re not subject to service charges and you can fix any issues yourself rather than having to rely on the leaseholder.

If you could pick one area/city/town in the country to invest in property for the next decade where would it be and why?

I would buy in Manchester where property prices are significantly cheaper, there is a high population and continued economic growth. 

Even though Andy Burnham is at the opposite end of the political spectrum from me, I think he is doing a phenomenal job overseeing the city’s overall growth.

What one location would you be avoiding and why?

I wouldn’t buy in central London. There are too many apartments with high service charges and there is lower demand. 

It’s also overcrowded with little sense of peace or tranquillity.

Do you think Prime Central London property will never be good for property investment ever again?

Unless there is fundamental change to the tax and growth strategy, it is no longer the playground of the rich. 

The most telling is that there has not been an influx of wealthy elites coming back to London from Dubai. They’re going to other countries. 

Prime central London will never be what it once was unless tax laws change. 

Are new builds a bad investment compared to period homes?

Period houses are the best investments but they come with a price tag. The house – as opposed to flat market – is stable and as the freeholder, you are the master of your own destiny. 

Newbuild flats are the worst investment as you invariably pay a 10 per cent premium when they are first launched onto the market. 

If you’re going to buy a flat, at least ensure you’re buying a second or third run one but check the service charges. 

Has the leasehold market become toxic and should buyers be steering clear?  

The leasehold market is not toxic in and of itself. There’s been a lot of bad press centring on nightmare struggles between leaseholders and flat owners but these are far from universal scenarios. 

If you go in with your eyes wide open and buy a property with a long lease, some leasehold properties are pretty good value right now.

If you were chancellor the exchequer what would you do to help first-time buyers?  

I would scrap stamp duty altogether as it inhibits people from buying. First-time buyers can’t get on the property ladder; couples can’t afford a family home once children come along and seniors can’t downsize. 

I would also underwrite 100 per cent mortgages for first time buyers. 

Do you have a negotiation tip you’d offer buyers when they make an offer to estate agents? 

This is going to pain some people given the reputation of our industry but befriend your estate agent. 

We will probably overshare which means we’ll give you more information than we probably should. 

Also, if I have to advocate on behalf of a tenant or buyer, I’m going to advocate harder on behalf of the one I like. 

What’s the best piece of advice you can give to someone looking to get on the ladder?

Research. Go in eyes wide open especially if you’re buying an apartment. See accounts, particulars of the lease, service charges, any section 20s (legislation which enables major works to the building) and know your budget. 

Prior planning and preparation prevents poor performance.

What’s the best piece of advice you could give someone planning to sell their home this year?

It’s a cliché but it’s a cliché for a reason: declutter and make the space appear neutral. 

The buyer has to imagine themselves living there and so your all black sitting room with pink ceilings which really reflects your style may look great, but it isn’t going to help sell your property.

What’s the best property investment you’ve ever made? 

Buying a derelict building, renovating it and splitting it into four flats. 

We own the freehold so there are no service charges. It now generates £12,000 a month.

And what’s your worst ever investment?

Buying a flat above a commercial unit. Previously commercial units were zoned but when Robert Jenrick was housing secretary, he did away with commercial zoning. 

I was once secure that the ground floor commercial premises would remain a shop but now it can be used for a smelly takeaway restaurant. It’s effectively rendered the flat unsellable.

What would you do if you inherited £100,000 tomorrow?

I would sell my flat and buy a house in Putney. With the uncertainty in the stock market and geopolitics, freehold houses are still the safest place to invest money.