Private sector rents could rise 15 per cent by 2023 as the supply of new rental properties dries up, according to a survey by the Royal Institution of Chartered Surveyors.
It said small-scale landlords are pulling out of the market, largely because of tax changes brought in last year which have made buy-to-let investments less profitable. RICS said its survey suggested that East Anglia and the South West of England were likely to see the sharpest growth in rents from now until 2023. RICS said it was time the Government looked again at the way the private rented sector was regulated. It said its members have seen the supply of new rental property falling consistently for two years. The views were echoed by the Association of Residential Letting Agents, who reported that BTL investors are being pushed out of the rentals market by increasing costs and continued regulatory changes, while new landlords are being deterred from entering it. Increased demand from tenants was pushing up competition and the rents being charged. David Cox, chief executive of ARLA said “To put tenants back in the driving seat, we need more homes available to rent, and the only way this will be achieved is if the Government makes the market more attractive for BTL investors.”
The majority of both RICS and ARLA members are seeing steady increases in the number of people looking to rent, although the numbers are levelling off. Simon Rubinsohn, RICS chief economist, said: “The risk… is that a reduced pipeline of supply will gradually feed through into higher rents.” A Treasury spokesperson said the reasoning behind the tax changes was to make more houses available to homebuyers. “We want to realise the dream of home ownership for a new generation, and that’s why we introduced a cut to stamp duty for first time buyers, and have built 1.1m additional homes since 2010,” the spokesperson said. Changes to the buy-to-let tax regime brought in last year mean that mortgage tax relief for landlords will be restricted to the basic rate of income tax by 2020. RICS said the full impact of the changes and increases in stamp duty have yet to be felt. Abdul Choudhury, RICS policy manager, said: “Withdrawing tax breaks that small landlords relied on, placing an extra 3 per cent on second home stamp duty, and failing to stimulate the corporate build-to-rent market, has understandably supply. “The Government must urgently look again at the private rented sector as a whole, including ways to encourage good landlords. Ultimately, Government must consider the impact of its policies, and if the wish is to move away from the private rented sector, it must provide a suitable alternative.”
By Patrick Mooney, editor