At a time of uncertainty, resulting from a concoction of issues including confrontational Brexit negotiations (both at home and abroad), a government with no working majority* and interest rates rising for the first time in a decade, the lettings' market is finely balanced with affordability being a key component for both landlords and tenants.
Landlord returns are being steadily eroded, but if they try to redress the balance by increasing rents the level of demand from tenants will fall.
However, on the positive side the government has announced that letting agents are to be regulated and new proposals will require that they join a professional organisation and meet 'certain minimum standards'. The Association of Residential Letting Agents (ARLA) and various other bodies have been lobbying for many years for this to happen.
In addition, while letting agents already have to be part of a redress scheme, this will now be extended to all landlords to enable tenants to complain about poorly managed properties and rogue landlords.
Alan Stewart, Director & head of Residential Lettings & Property Management says: "The buy-to-let sector is still very challenging for landlords who have had to contend with changes in regulations and legislation with investment having been curtailed - particularly amongst the more short term speculative landlords - by the restriction of income tax relief on mortgage interest payments and the introduction of more stringent mortgage affordability tests.
"Pressures on the residential investment market and achievable yields will certainly continue next year with many local authorities introducing selective licensing controls on some properties plus the effect of new Energy Performance regulations, which will increase the financial burden for landlords."
Legislation will be introduced next year to prevent tenants being charged any fees in connection with the letting of a property. This will impact significantly on letting agents
According to latest figures from the British Property Federation the build-to-rent sector is continuing to grow and play an important part in increasing the supply of homes. Combined with this, the Prime Minister has just unveiled a major council house-building programme that will see the release of government owned land and the goal of providing homes at affordable rents.
In the student housing sector investment demand is buoyant. In a recent survey it is estimated that there has been a 24% increase in transactions in the first half of 2017 compared to the same period in 2016. Purpose built student accommodation continues to offer attractive returns, particularly for overseas investors.
Alan continues: "Our region has seen a period of rental stability with tenants now very focussed on achieving value for money when selecting properties. If the accommodation is not well presented we are finding that prospective tenants are looking elsewhere or seeking a reduction in the asking rent.
"I believe that during the course of 2018 we may find that some accidental landlords look to sell their properties and larger investors take the opportunity to restructure their portfolios, but overall demand could be sustained by first time buyers who still cannot afford to purchase a property and there will be more choice in the rented sector with the completion of a variety of build-to-rent schemes.
"At Caxtons we are keen to promote the benefits of engaging a good letting/managing agent who can steer a landlord through all the complexities of letting residential property."
* The Conservative Party has formed a minority government and has signed a "confidence and supply" agreement with the Democratic Unionist Party.