Rental market crisis looming?

04 Oct 2016

According to a new report out by RICS today, supply of rental properties is declining and could result in a crisis in 2025.

On our blog last week, we focused on the rise in popularity of Airbnb, which in some areas is having an impact on the availability of rental properties for ordinary tenants.  With the ever increasing price of properties, the rental market has been booming.

RICS says: “The number of UK households renting property doubled from 2.3 million in 2001 to 5.4 million in 2014. However, earlier this year, the Government took measures to dampen the demand for buy-to-let investments by making changes to the Stamp Duty threshold. This has further reduced supply, arguably making a 2025 rental supply crisis more likely. The problem is expected to be exasperated next year when landlords’ right to deduct their mortgage interest from their income tax bill is removed.”

The government’s efforts to dampen the housing market by putting the brakes on buy-to-let investors, appears to be having an unwanted side effect of reducing supply for tenants.

RICS is urging the government to revisit the previous administration’s decision make changes to Stamp Duty. “We urge the Prime Minister to abandon David Cameron’s previous home ownership focus and reverse April’s Stamp Duty measures in order to address short term rental supply issues.  However, [we] are recommending that Government takes a much bolder long-term approach and pioneers a new build-to-rent sector, with the private sector encouraged to build properties specifically for residential letting. [We] would like to see pension funds incentivised with tax breaks to build large scale rental properties with affordable elements. Additionally, local authorities holding brownfields sites should be encouraged to release land for such properties.”

So, despite all the tax changes, it would seem like it is still a good time to become a landlord….