Number of homes to let diminish as landlords exit
Growing numbers of landlords exiting the buy to let market has resulted in the UK facing serious rental shortages according to Home.co.uk. The inclination towards property offloading comes in view of a slew of legislative changes introduced by the government, such as the removal of tax breaks for buy-to-let investors.
While the introduction of these policies is continuing to affect landlords’ bottom-lines, it is also deterring potential investors from investing in residential property for business purposes, impacting the supply of rental properties. Consequently, the number of properties available to rent experienced a 12% fall across the UK. London emerged as the most severely hit with rental properties dropping by nearly 20% drop over the corresponding period. David Cox, ARLA Propertymark Chief Executive, said: “The barrage of legislative changes landlords have faced over the past few years, combined with political uncertainty has meant the BTL market is becoming increasingly unattractive to investors.”
Together with the ban on letting fees, tenants are likely to experience a hike in rental prices as the industry tries to recover returns on their investments. Considering that demand for private rented homes continues to outstrip supply, it will be challenging for tenants to counter the industry’s reflex to raise the rents. Prime parts of the capital have already experienced a significant growth in rental prices. Home.co.uk reports that rents have compounded by almost a quarter – 24% – in the London borough of Westminster since June 2017, while Chelsea and Kensington have also been subjected to rent increases.
Buyers, on the other hand, greeted changes in tax and a further 3% added to Stamp Duty for second home buyers as an opportunity for owner occupier prospects. Moreover, with the Government investing in schemes such as Help to Buy aimed at helping first-time buyers onto the property ladder, buying a home is becoming a reality for many. However, without a meaningful increase in available stock, the effect on house prices has been marginal as a result of tax changes. Average house prices are more than four times annual income after tax for nearly 90% of 25- to 34-year-olds according to data from the Institute of Financial Studies. Research by Savills further reveals the 75% of Britain’s housing wealth is owned by people aged 50 and above, while just 6% was owned by people aged 35 years or less. The study further reasons that real improvement would only be a result of boosting housing supply and encouraging developers to build affordable properties, within the means of first-time buyers.