The private rental market in the UK is thriving but could be changed if the Government goes ahead with changes to mortgage tax relief for landlords and fails to help increase supply, it is claimed.
According to the latest rental index from Belvoir lettings rents increased slightly in the third quarter of 2016 but did not go up as much as in 2015. Rents for studio flats were more static while house rents fared better with four and five bedroom detached houses increasing by approximately £25 to £50 per month quarter on quarter.
The data also shows that 88% of Belvoir offices around the country reported an increase in demand for rental houses and 63.5% an increase in demand for apartments.
But the firm’s chief operating officer Dorian Gonsalves believes that this stability is threatened by the new mortgage relief tax policy that is due to come into force in April 2017 and which the lettings industry is currently lobbying to have reversed.
He explained that the research shows that during the next quarter nobody is expecting a massive change and historically the second and third quarters tend to show an increase and the fourth tends to be when there might be a decrease as landlords don’t want properties to be left vacant at this time of year and so it is an opportunity for tenants to pick up a bargain.
The research also found that two to three bedroom houses remain top of the list for stock shortages, with 81% of offices reporting a shortage of three bed semi-terraced houses, 68% reporting a shortage of three bed detached homes and 66.5% of offices reporting a shortage of two bed houses.
It shows that 46.3% of Belvoir franchise owners reported that the average time for tenants to rent was 13 to 18 months while 27.78% reported the average time in a rental property was over two years. Some 42.59% of franchise owners reported that the average void period for properties in the third quarter was up to two weeks.
‘Much of Belvoir’s data is helping to dispel the myth that the only people who are renting are those who cannot afford to buy. Because of the last Government’s shift in policy away from home ownership and the lack of houses being built, there is now an urgent need for more housing for students, migrants, labourers who are moving to new areas for jobs, and professionals with families who require four to five bedroom accommodation and view renting as a better option,’ said Gonsalves..
He pointed out that 2015 and 2016 are the first years since the recession where wages have been increasing faster than inflation, a situation that is likely to continue until the end of the year. ‘However, there is no doubt that Brexit will result in an increase in inflation next year and when this happens, as it did during the recession, it will hit people’s pockets,’ he explained.
‘When people are not experiencing wage growth and have less cash in their pockets, landlords in some areas are going to find themselves in a difficult position as they will be incurring tax increases, but will struggle to increase rents to cover this because we know that rental increases can only be in line with wages. This is something that we hope the Government will listen to, and take steps to address,’ he pointed out.
‘If there is no reversal in government policy with regards to mortgage relief taxation, and no measures are introduced to increase the supply of rental properties then landlords are likely to come under increasing pressure to raise rents. If they subsequently start selling off properties, this will clearly have a negative effect on the availability of good quality accommodation. We await the Chancellor’s Autumn Statement on 23 November with great interest,’ he added.
