The UK needs to “stop punitive measures” against the country’s landlords, the Royal Institution of Chartered Surveyors has warned.
The comments from the highly respective industry body arrive after a year when the private rented sector has been subject to a string of new policy announcements, from a stamp duty surcharge on buy-to-let purchases and the phasing out of mortgage interest tax relief, forcing smaller investors up a tax bracket, to, most recently, a ban on letting agent fees for tenants, which is expected to see costs passed on to landlords. As a result, many will have no option but to raise their rents. Many have already begun, according to some research.
In January, new rents in the UK rose 2.6 per cent year-on-year, according to the latest Countrywide index, with 36 per cent of landlords increasing rents when signing new tenancies, up from 27 per cent a year ago.
Over the next five years, the RICS now projects that rental projections point to a cumulative increase of just over 25 per cent, outpacing house price growth.
Indeed, rental demand is not about to stop growing, according to the RICS, with the exceptions of possibly London and Scotland.
New landlord instructions in the lettings market, though, failed to improve for a fourth consecutive quarter in January 2017, with surveyors expecting landlords to decrease the size of their portfolios over the next three years. 28 per cent more respondents felt that landlords were likely to decrease the size of their portfolio over the next 12 months, while over the next three years, 26 per cent more contributors expected landlords to scale-back their portfolios.
Connells Survey & Valuation reports that valuations for landlords investing in property in the UK has fallen 63 per cent year-on-year.
As supply struggles to meet demand, rental rates are expected to continue growing at a national level, putting tenants under a greater squeeze.
John Bagshaw, Connells corporate services director, says: “The new White Paper’s aim of helping tenants through supporting the build to rent sector could be rendered ineffective with this recent drop in investment from private landlords. While a potential increase in build to rent homes will take some years to filter through, the slowdown in buy-to-let purchases will soon start to bite, with fewer rental properties coming onto the lettings market. This shortage of supply could fuel competition from tenants with the potential to push up rents.”
“There is a serious risk that the Government’s attempt to increase the number of affordable homes to rent will also be overshadowed by the impact of George Osborne’s taxation policies aimed at private landlords,” he adds. “As the Government’s definition of ‘affordable’ is linked to the market averages, rather than tenant incomes, rising rents could mean new ‘affordable homes’ are out of reach for those just about managing.”
Jeremy Blackburn, RICS Head of UK Policy, welcomed the government’s increasing emphasis upon the Build to Rent sector as a means to boost supply in the long-term: “They’ve listened to us on expanding supply not just pumping demand, and on giving institutionalised PRS much greater priority alongside owner occupation. Our survey demonstrates how vital greater supply is in this sector; we really need to turbo boost Build to Rent.”
However, in the short- and medium-term, the government needs to “stop punitive measures against our bedrock small landlords”, he echoed.
“The detail on the ban on letting agent fees is yet to come, and along with any overt forcing of longer tenancies, could dampen investment in buy-to-let overall. The government must be careful about signalling both stop and go at the same time.”
The Residential Landlords Association has also called for the government to rethink its plans ahead of March’s 2017 budget.Google+