According to letting agency Belvoir, there has been a large rise in the amount of investment property landlords selling their rental homes, as well as a significant decline in the number of people becoming investors in the PRS (Private Rented Sector). Belvoir also reports that the reasons behind landlords leaving the market is primarily down to punishing tax changes inflicted on landlords by the government.
The findings support other recent reports which suggest that buy-to-let landlords are abandoning the PRS market in droves. The Royal Institute of Chartered Surveyors (RICS) has stated in its most recent residential property outlook that rental prices are expected to steadily rise up to the year 2023, as the amount of properties available to rent reduces. RICS has also predicted that national rent prices could potentially increase by around 15 per cent over the next five years.
The organisation has also warned that potential tenants may have to deal with bidding against one another in order to secure a rental home, which will push up rental prices in return. This will be due to the falling supply of rental homes caused by the increase in the amount of investment property landlords leaving the private rented sector, with the government’s harsh tax changes to blame. Dorian Gonsalves, CEO at Belvoir, has tried to reassure landlords that despite government policies,such as the increase of stamp duty on investment properties and loss of tax relief for mortgages, causing harm to their income, landlords still have the choice of how to invest their funds, whilst tenants have little or no choice in which areas to rent homes, due to the decline in supply.
The Q2 rental index released by Belvoir has discovered a minor rise in inflation in average rental prices across Britain, with a similar slight surge in static rent figures. If investment property landlords continue to leave the PRS and sell up, as their business model is repeatedly attacked, this will certainly result in more property shortages and an inevitable rise in rent, as the latest RICS study predicts. Concerns raised by potential mandatory tenancies of three years could also deter investors from choosing the BTL sector, and according to Gonsalves, this could certainly lead to a rise in homelessness.
Although most landlords are not campaigning against these potential tenancy changes, Gonsalves notes that landlords need the reassurance that they could gain possession of their investment property again as needed, and that they will also be protected in cases of tenants abusing the property, committing anti-social behaviour or refusing to pay their rent. Belvoir is imploring the government to address property shortages in the country within the Autumn Budget, and to provide incentives for the new build sector to provide more homes through Buy to Rent and Help to Buy schemes.
Gonsalves states that now is the time to reward and provide incentives for landlords to reassure them to stay in the PRS, with measures such as tax breaks, reversing tax increases and tax incentives for investors who buy larger properties to renovate into low maintenance and affordable flats for the PRS. It is expected that many landlords will decide whether to remain in the sector in 2019, when taxes will be calculated.
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