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Rents set to rise further as demand grows and supply falls

Rents will continue to rise over the next few months, owed in part to a reduction in housing supply in the private rented sector (PRS), as more buy-to-let landlords exit the market as a consequence of recent tax changes, according to a leading letting agent.

Adrian Gill (below), director of lettings agents Your Move and Reeds Rains, believes that tenants will be the losers from the extra stamp duty on buy-to-let landlords, as the additional levy looks set to exacerbate an already chronic shortage of properties in many areas reducing choice and driving up rents.

Rents set to rise further as demand grows and supply falls

“Ultimately this will only punish tenants, driving out buy to let landlords will reduce supply leading to lower choice and higher rents for those that can least afford them,” he said.

Gill believes that early spring is just the “calm before the storm”, as demand for homes in the PRS is driven by the flow of jobs and the flux of a generally more mobile workforce looking for a place to live.

“This reflects the strengths of private renting, the opportunity for young independent adults to strike out on their own, or for families to move across the country and earn the best possible livelihood. In the towns and cities with the biggest renting populations it is a constant struggle for supply from landlords to match demand from tenants. With a surge in jobs and local economic activity, rents rise. Keeping pace will not be easy, and will depend on the freedom to invest as a landlord.”

A survey conducted by the Association of Residential Letting Agents (ARLA) last week found that two thirds (65%) of landlords will refrain from acquiring more properties for buy-to-let following the recent surcharge on stamp duty and the cap on tax relief for buy-to-let mortgages, which in turn will reduce the supply of rental properties.

Three in five (61%) of ARLA agents now believe that rents will rise further as a result of the changes.

David Cox (pictured) at ARLA said: “Whilst landlords adjust to the increase in costs we can expect to see one of three outcomes prevailing in the buy to let market: landlords absorbing the cost and taking the hit; landlords withdrawing from the market causing supply to fall; or landlords regaining those costs through hiking rents. Next month we can start to assess the damage.”

Rents set to rise further as demand grows and supply falls

The latest data from the Office of National Statistics (ONS) shows that rental prices in the PRS rose by an average of 2.6% over the year to March 2016, unchanged when compared with the previous month.

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