Research carried out by the Residential Landlords Association has revealed that 25% of landlords are planning to sell at least one property next year. Experts are warning that if this happens, the supply of rental properties in the UK will fall, which will push rents up. They predict that rents will rise by approximately 3% in 2020.
RLA Blames Government Policy
The RLA is blaming government policy for the hostile climate in the UK’s private rental sector.
“All the talk of longer tenancies will mean nothing if the homes to rent on not there in the first place. The Government’s tax increases on the sector are already making it difficult for tenants to find a place to live, with many landlords not renewing tenancies,” says David Smith from the RLA.
He adds that proposed changes to Section 21 notices risk making the current situation even worse.
Government Policy Offers Clear Benefits for Landlords Says Housing Minister
Naturally, the government disagrees with the RLA’s bleak assessment. The Minister for Housing and Homelessness is adamant that government policy is creating “a more stable and secure sector” that will have “clear benefits for landlords to operate and invest in”.
“Our proposals are designed to strike a fair balance between landlords and tenants to maintain the supply of good quality rented accommodation,” she says.
Supply and Demand
Supply and demand are the building blocks of the private rental sector. The impact of reduced supply has already been seen in London, where demand is far higher than the number of available rental properties. As property prices have risen in London, landlords have moved out of the capital in search of better rental yields, causing a big shortage of suitable accommodation at the lower end of the market.
Today, rents in the capital are at their highest ever level, which makes it very hard for anyone on an average income to find a rental home and save any money. This has created a gap in the market for rogue landlords who are happy to rent out beds in sheds for cash.
Landlords Deserting London
The number of landlords operating in London has fallen by 17% since 2015. Many of them have moved their business to high yield places like Manchester and Newcastle.
“Successive legislative and tax changes have hit buy-to-let investors hard over the past few years, particularly for those owning property in their individual names,” says Gray Stern from Dot Residential. “However, sound investment opportunities still exist, particularly for those looking to build portfolios in fast-growing markets outside of London.”
Tenant Demand Rising
Landlords may be contemplating their futures, but there is no sign of tenant demand waning. Figures from the Royal Institute of Chartered Surveyors say tenant demand has risen for the third year running, while data from the Ministry of Housing, Communities and Local Government revealed that the number of homes in the PRS fell by 46k in 2018.
Professional landlords are likely to weather the storm of government tax cuts and policy changes, but smaller landlords are far less inclined to view buy to let as a good investment. If this trend continues, the situation for tenants is unlikely to improve.
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