The signs are that 2018 looks set to be another difficult year for buy-to-let landlords as tax hikes bite.
An increasing number of buy-to-let landlords are likely to exit the private rented sector over the next 12 months due to policy changes, and that could have a major impact on house price, according to the latest housing market predictions from Home.co.uk.
The property website has already acknowledged a sharp rise in the volume of homes for sale in recent months and believes that this trend will continue, placing downward pressure on residential prices as properties flood the market.
But while there is an anticipated jump in new listings of property for sale, the number of rental properties on the market is expected to fall, as the government’s anti-landlord measures causes swathes of landlords to cash in on their property investments.
According to Home.co.uk, the number of new sales instructions jumped by 11% across the UK between November 2017 and the corresponding month last year, while at the same time the supply of rental properties dropped by 16%, and those compiling projections on behalf of the website firmly believe that this trend will continue throughout 2018.
London and the South East, which have already suffered price falls during 2017, is expected to be hit hardest next year because the high cost of property means rental yields are less of a hook to keep landlords in the market.
The data shows that property prices in Greater London dropped for a fifth consecutive month in December, by 0.3% compared to November, pushing the year-on-year change to -1.0%.
In the South East prices fell by -1.4% between November and December and the annual change is now 2.3%, less than the England and Wales average of 2.6%.
In contrast, 2018 looks far brighter for sellers in Yorkshire and the North West in particular. These are two areas that Home.co.uk anticipates will become the leading regions for price growth towards the end of next year.
Annual price hikes of 4.7% for the North West and 4.4% for Yorkshire during 2017 are the biggest in these regions for many years and further rises are expected next year, thanks partly to fact that private rental landlords in these areas enjoy some of the highest yields in the country, which means property is in demand from both buy-to-let landlords coming into the market and existing landlords keen to hang onto their existing property investments.
Prices in the West Midlands are also set to increase further due partly to greater interest from buy-to-let investors. Asking prices in this region rocketed by 6% over 2017 with further increases likely into next year.
The private rented sector now accounts for around a fifth of residential property ownership, which makes it one of the most significant drivers of change in the property market.
Home.co.uk director Doug Shephard said: “Any sort of buy-to-let exit will tip the market to the downside and the UK government should be monitoring the situation very carefully. Why? Because such a risk to the housing market would imperil the banks and the wider national economic interest, especially post-Brexit.
“If landlords are forced to sell up, all property prices will be driven down, leaving the first-time home owner in negative equity and mortgage liquidity hard to find for the first-time buyer. Surely not something the government would wish upon the housing market in 2018.”