Rental market set for renewed demand
Rental prices are likely to increase further as a result of the combination of increasing demand and fewer available properties, according to the findings of a new report from the Residential Landlords Association (RLA).
The impact of house prices and stamp duty is that fewer people are able to afford to get a footing on the property ladder initially, forcing them into rental property.
However, that in turn will put further pressure on the letting market, which has fewer properties available to rent, owing to a growing number of landlords, faced with increased costs such as stamp duty, looking to sell their buy-to-let properties.
The RLA conducted a survey of almost 3,000 landlords, which indicated that 22% intend to sell at least one of their properties within the next 12 months, while less than 20% are planning to expand their buy-to-let portfolios with additional property.
The research highlighted that demand is outstripping supply, with a third of respondents saying that they had experienced a rise in demand for rental property in the past three years.
As a result, 47% of landlords are expecting to see average rental prices rise, although 35% of landlords attribute this to the phasing out of mortgage interest tax relief on buy-to-let properties.
As demand continues to increase for homes to rent, punitive tax changes are discouraging investment by the majority of good landlords who want to provide accommodation"
--says Alan Ward, RLA chairman.
Andrew Turner, chief executive at Commercial Trust, commented:
The findings of this research indicate that Government measures, aimed at making first-time buying and renting more affordable, are currently having the opposite effect and are creating a vicious circle.
“With fewer buy-to-let landlords looking to purchase properties (and many looking to sell), there are fewer properties available for those looking to rent and rental prices are going up. At the same time, property has become no more affordable for first time buyers so they are being backed into an increasingly expensive corner.
“There is an urgent need for the Government to review its recent changes to mortgage interest tax relief and stamp duty, to give landlords the confidence and encouragement to invest in the homes needed to service those who wish, or need, to rent . This in turn will make the rental market much easier and more affordable for tenants.
“Despite landlord fears, it is clear their valued contribution to the UK housing market remains strong, and is needed now more than ever. With the right strategy and buy-to-let solution in place, it is also a favourable and profitable investment.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.