UK private property rents expected to soar at a result of public sector cuts

Rents will increase 13.3% this year and will average 5.4% until 2014, well ahead of even the more pessimistic forecasts for inflation, according to Cluttons.
 
Andrew Stanford, head of Cluttons’ residential consultancy division, the persistence of mortgage lending constraints will expand the cohort of households to whom homeownership will not be an option, and for whom renting will be viewed as a medium to long term necessity.
 
‘An expansion of the provision of housing for rent will be dependent on the private rather than public sector for all but a small minority of very disadvantaged families. Given the finance challenges, it is unlikely that small scale buy to let landlords will be in a position to fill this gap,’ he explained.
 
‘The opportunities in the private rented sector are undoubtedly there for those organisations with access to suitable property, funding, and more significantly management skills,’ he added.
 
Nigel Terrington, chief executive of buy to let mortgage specialist Paragon, said Chancellor George Osborne’s decision to cut the social housing budget and keep rents in line with the open market will make private rented property an option for people who would not have considered it previously.
 
‘The government has to be careful not to shift the role of housing people on low incomes on to the private rented sector without ensuring it has appropriate levels of support at both an economic and regulatory level. Failure to do so could be dangerous because it could lead to a shortage of rental property at a time of unprecedented levels of tenant demand,’ he explained.
 
David Salusbury, chairman of the National Landlords Association, warned that without measures to encourage private landlords to invest in their rental portfolios it is hard to see how the private rented sector will be able to expand to meet increasing demand.
 
Ian Long, director of St Trinity Asset Management, said that it is inevitable that thousands of households will come intense financial pressure over the next four years, which will push up mortgage arrears and repossessions.
 
It is also a dire time for first time buyers, according to James Moss, director at Curzon Investment Property.  ‘With social housing drastically cut back, there will be even more demand for private housing at a time where practically nothing’s being built because of the government’s nimby planning laws. This false economy where supply is restricted will push prices up – in full contradiction of what the housing minister has promised,’ he said.
 
Yolande Barnes, head of Savills Residential, said however, that while the proposed capping of housing benefits (HB) may diminish choice for tenants and discourage private landlords in this sector, there are other measures afoot which are likely to help expand the private rented sector and which should ultimately expand tenant choice.
 
‘It should mean that, ultimately, the private sector will be catering for intermediate and open-market tenants while the state subsidised sector (local authorities and registered providers) accommodates the poorest,’ she said.