With another busy 12 months on the horizon, what do letting agents need to look out for in 2021?
The last 12 months have been exceptionally busy for letting agents. Not only have they had to deal with the unprecedented Covid-19 pandemic, but there has been the now typical introduction of several new rules to comply with.
Although the outlook for 2021 remains uncertain in many ways, there are a range of events and trends that have already been established.
With this in mind, we’ve put together a list of five things to look out for in 2021, from Budgets, Client Money and stamp duty, to Section 21 and the long-term impact of Covid-19.
CMP compliance deadline set to pass
Mandatory Client Money Protection (CMP) scheme membership for letting agents was introduced in April 2019.
At first, agents were given a one-year grace period, meaning all firms would have needed to comply with the rules by April 2020.
However, in February, the Government announced that agents had been given an extra year to comply after the grace period was extended to April 2021.
The grace period extension was granted due to some agencies having trouble opening client accounts with banks. There have also been CMP issues for agents due to anti-money laundering rules.
After a 12-month extension, it is believed the deadline will now come to pass in 2021. Therefore, any agencies not currently complying with CMP rules need to get their house in order over the next four months.
A significant March Budget
The spring Budget in 2020 took place during the height of the first wave of Covid-19 just a couple of weeks before the spring lockdown was enforced.
Understandably, the Chancellor’s address focused on support for the economy and NHS to help it through the pandemic. The date has now been set for the 2021 Budget – it will be taking place on Wednesday March 3rd.
With severe Coronavirus restrictions still in place and many sectors continuing to struggle, it’s likely that Rishi Sunak’s statement will once again centre around pandemic-related support measures.
However, there is a huge deficit to fill and there is speculation that property taxes may be one way the Treasury attempts to claw back some money. A recent report from the Office for Tax Simplification suggested that Capital Gains Tax rates (CGT) are doubled and the number of exemptions reduced to bring in an estimated £14 billion for the Government.
Politicians are currently reviewing the report, so it would not be a surprise to see the Chancellor announce some changes to CGT rules in April.
What’s more, the Budget date has been set exactly four weeks before the stamp duty holiday deadline is set to pass, meaning there is still hope in the industry that the tax cut may be extended or tapered off.
The stamp duty holiday will come to an end
If the Chancellor does not extend or phase out the stamp duty holiday, it will come to an end on March 31st.
There is no doubting the success of the tax cut in stimulating the property market in the second half of 2020. As well as helping thousands of homemovers, the stamp duty holiday has provided a boost to landlords looking to expand their portfolios.
Although investors and purchasers of second properties have still been required to pay the additional 3% stamp duty surcharge, they have befitted from a tax exemption on the first £500,000 of any purchase.
According to Rightmove, this has translated to an average nationwide saving of £2,000 for property investors. In London, however, the average saving is estimated to be around the £10,000 mark.
As we approach the end of the stamp duty holiday, demand from landlords looking to expand portfolios may reduce. Therefore, the challenge for letting agents next year will be to explain why buy-to-let investment remains a sound long-term financial decision even with no stamp duty savings on offer.
The Renters’ Reform Bill – will it become law?
This was supposed to be the year when the Renters’ Reform Bill – which includes the policy to remove Section 21 from the Housing Act 1988 – would be introduced.
However, due to the pandemic it was delayed and in the autumn, Housing Minister Christopher Pincher said the Bill would not become law until ‘there is a sensible and stable and economic terrain’.
Alongside plans to scrap Section 21, the Bill – which has strong cross-party support – also intends to introduce lifetime deposits for tenants and extend the scope of the database of rogue landlords and letting agents.
Despite the ongoing challenges posed by Covid-19, there is a significant chance the Renters’ Reform Bill will regain momentum during 2021 because it has strong support from politicians and housing charities. It is also a central part of one of the Government’s major manifesto pledges to provide renters with ‘a better deal’.
It is therefore important for agents to continue to prepare for life without Section 21 while also managing ongoing changes to the evictions process which are next set to be reviewed in March.
Managing the ongoing impact of Covid-19
It has been a tough 12 months for the industry. However, since reopening in May, the housing market has bounced back admirably.
Since the market reopened in the spring, letting agents have had to focus on operating in a Covid-secure way. This includes health and safety measures in-branch and prioritising virtual viewings.
As we enter 2021 with severe restrictions still in place across large parts of the country, operating under this new normal looks set to be the order of the day for some time yet.
Agents have also had to consider the changing priorities and requirements brought about by the pandemic. Tenants are looking for properties with larger gardens, work from home space and, in many cases, away from urban areas and closer to the countryside or coast.
These trends look set to continue, so landlords will be looking for guidance on how they can provide properties located in high demand areas that are likely to be popular with renters.
With the nationwide Covid-19 vaccine rollout now underway, there is light at the end of the tunnel and hopes that 2021 will a more normal and less challenging year for everyone.
We’re with you every step of the way at this challenging time for your business, you’re at the heart of everything we do.
Be positive, stay strong and keep healthy. What the pandemic has proven is how we as an industry can come together and continue to work and deliver for our customers.ANDY HALSTEAD
Group Chief Executive