There has been a significant increase in the number of buy-to-let landlords selling up, along with a notable reduction in the volume of people investing in the Private Rental Sector (PRS), according to Belvoir.
The letting agency reports in its Q2 rental index that landlords are exiting the market mainly due to punitive tax changes.
Belvoir’s findings compliment various reports that suggest landlords are leaving the market in large numbers.
According to the latest residential property forecast from the Royal Instituted of Chartered Surveyors (RICS), rents are forecast to see strong growth over the next five years as a consequence of the reduction in the number of new properties available for renting.
The trade body predicts that national rents could rise by as much as 15% between now and mid-2023.
RICS warns that many prospective tenants now face having to bid against each other, pushing rents up in the process, as a result of falling supply caused by a jump in the number of buy-to-let landlords exiting the PRS, due to the government’s draconian tax changes.
Belvoir CEO Dorian Gonsalves commented: “Although government policies such as a loss of mortgage tax relief, and increased stamp duty on second homes is hurting landlords, they still have a choice as to how to invest their money, whereas tenants have little or no choice of where to rent due to a reduction in supply.
“Belvoir’s Q2 rental index revealed just a slight increase in average rental inflation across the UK, with a similar number reporting static rents, but if landlords continue to sell up because their business model in the PRS is being continually attacked, it will undoubtedly result in a further shortage of properties, and inevitable increases in rents, as predicted in the latest RICS report, which stated that rents are likely to rise by 15% over the next five years.”
Concerns about the possibility of mandatory three-year tenancies may also deter people from investing in the BTL sector, and this could genuinely lead to an increase in homelessness, according to Gonsalves.
Although many landlords are not actively against three-year tenancies, Gonsalves pointed out landlords do understandably need reassurance that they can gain possession of their property when needed, and will be “protected against tenants who do not pay their rent, or abuse a property or indulge in anti-social behaviour”.
Belvoir is urging the government to do more in the Autumn Budget to address stock shortages in the UK, by incentivising the new build sector with low maintenance homes through more Help to Buy and Buy to Rent schemes to provide more homes to own.
Gonsalves continued: “Landlords also need rewards and incentives to encourage them to remain in the PRS, such as reversing current tax increases and introducing tax breaks, as well as initiatives such as tax incentives for landlords who buy large properties and turn them into several affordable and low maintenance flats suitable for the rental sector.
“It is anticipated that more landlords will make a decision about whether to retain their portfolio in 2019, when tax bills have been calculated and the true extent of any further erosion to their profits is seen.
“The Autumn Budget is the perfect time for the government to introduce the incentives that landlords who offer good quality properties at a reasonable rent really need.”