Property investments by landlords accounted for just 12.5% of all homes sold in the UK last year, which is the lowest figure for the past nine years. Every region experienced a decline in the proportion of properties being sold as buy-to-let investments by landlords, according to Countrywide’s letting index. The situation was most precarious in London, with 5,400 fewer properties being bought by landlords year on year.
Higher taxes and additional expenses such as stamp duty, along with increased regulations, legislation and licensing, all seem to be having an effect. As a result, there are fewer properties available to rent at a time when demand is increasing. By last December, the were number of homes to rent in the UK was down by 4% compared to the same month in 2016. London saw the biggest drop of 21%. It still means there are 5% more rental properties available than in 2015, however.
Due to the fall in rental housing stock plus increased expenses for landlords, rents have risen recently. Rents rose by an average of 2.4% last year, which is up from 1.8% in the previous year. In December 2017, the average monthly rent was £960, which was £23 a month more than tenants were paying at the beginning of the year. Increased competition for rental properties this year is likely to drive an even faster growth in rents.
The situation could even worsen, with one in five landlords looking to scale back their buy-to-let portfolio this year. National Landlords Association research has shown that 20% of landlords are planning to reduce the properties they hold. Buy-to-lets are seen as less attractive because of a weaker housing market, new taxes and difficulties in getting mortgages. Research by Capital Economics, carried out for the NLA, shows that recent changes by the government will mean landlords and tenants are paying much more tax. They have produced videos showing an overview of the rental sector. One video compares the taxes of four different types of people who earn £50,000. Not surprisingly, landlords are paying more than their fair share of tax, compared to professionals earning a wage or salary. Another video shows that tenants could face higher rents while having fewer properties to select in the rental sector.
With more people having to rely on rental properties because they cannot afford to buy, maybe it is time for the government to take a look at the impact that its policies are having on the private rental sector.
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