We reported (Dec 2016) that in our opinion rents for residential properties throughout the UK would increase. This is not surprising as investors leave the letting market due to a raft of anti landlord legislation that has been introduced recently. There are currently criminal sanctions under the “Right to Rent” legislation too. For this reason some landlords are selling up and looking to investment in sectors where they are not demonised.
Royal Institution of Chartered Surveyors (RICS) have reported that landlords under some Rents are forecast to rise by more than 20% over the next five years as the falling number of new landlord instructions persists.
The RICS latest monthly residential property market survey found that the number of landlord instructions dropped by 10%, the weakest reading in over two years. They estimate that this trend will continue for the foreseeable future as changes to mortgage interest tax relief from next month have an adverse impact on investment levels in the buy-to-let sector. Rental prices look set to increase faster than house prices over the next five years, RICS said.
But while new housing supply in the private rented sector falls, demand for rental accommodation looks set to increase further and it is this widening supply-demand imbalance that is likely to place upward pressure on rental values.
When it comes to home prices, chartered surveyors said that they anticipate an increase of about 18% over the next five years.
Reflecting on RICS’ survey, Stephen Wasserman, managing director of West One Loans, said: “The persistent supply versus demand challenge plagues the property market, with landlords looking to capitalise on strong demand having to overcome sustained supply-side issues.
“The changes to buy-to-let taxation are likely encouraging some to put the brakes on their investments but, with many hungry renters, landlords shouldn’t walk away completely.”
Perseverance in the buy-to-let market is likely to “deliver results” for landlords, according to Wasserman, who reports that a growing number of professional landlords are switching to buying through limited companies and other methods to mitigate the tax changes.
“The government and private sector are working to rectify the supply issue, but this will take time and there are opportunities for investors in the interim too,” he added.