Warnings are being aired about a rental drought, as fewer properties are available and prices soar. The property search engine, Home.co.uk, has noticed a 12% fall in listings for rental properties in the past year. It says changes in taxes for buy-to-let investors and the Right to Rent regulations have put off landlords. It says London is the hardest hit, with a 20% drop in rental properties, particularly in the wealthier districts which, in turn, have seen rents soar. Westminster was hit the hardest, with listings falling by 447 to 2,673 in the past 12 months, and the average monthly rent soaring 24% to £5,292. This lack of supply coupled with high demand means properties are being snapped up when they do become available. Figures show a rental property is only on the market for 39 days on average. However, this high demand is not producing high yields for landlords. Rental yields in Westminster are around 3%, although returns are expected to improve. There were 427 fewer listings in Kensington & Chelsea, with just 1,584 properties available, and rents have risen in this borough by 14.7% to £5,502 in the past year.

Home.co.uk director, Doug Shephard, called it a “rental drought”. He said tenants are finding it particularly tough, as they face increased competition for quality properties, coupled with higher rents. He pointed out that bureaucracy and higher taxation for buy-to-let investors has led to many landlords selling up. He said that some landlords continue to lose money overall even if they raise rents, which is also leading them to see selling up as the only option. The private-rental sector makes up 20% of the UK housing stock, with many buy-to-lets owned by landlords with small portfolios. The shifts in taxation and increased regulations are forcing many of these smaller landlords out of the market. It is estimated that around half of all landlords in the UK own just one property. They are operating on a tight margin and so any financial changes which affect them adversely mean they either raise rents or sell up. This lack of confidence by smaller investors in the rental sector could have a knock-on effect on the property market overall.

Of those landlords who remain, 40% of buy-to-let investors say they have been forced to increase rents this year because of financial pressure. The average UK rent is £918, with a prediction of a further 2.5% rise in 2018. Online letting agent, MakeUrMove, forecasts tenants could have to find an extra £23 in rent each month. London tenants will face the biggest increases. Many tenants are already finding it difficult to pay the monthly rent and any increases could force them into debt or rent arrears. Also, many tenants will be forced into poorer quality housing, because of the shortage. The housing crisis, in turn, has an impact on the economy as a whole, with professionals declining to take up work in areas where there is an acute shortage of affordable, quality rental properties.

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