Rents Rise as Supply of Rental Properties Falls (allegedly)

Subjective, debatable but interesting article from Landlord Today. As follows:

Tenants are facing higher rents as the supply of rental properties continues to fall due to George Osborne’s hefty, punitive tax changes, new figures suggest.

The Association of Residential Letting Agents (ARLA) report that the number of properties registered per letting agent fell year-on-year by 5% in April, which mean that renters will almost certainly face an even tougher time following the chancellor’s stamp duty reforms, as landlords naturally seek to recoup their costs by hiking up rents, amid a shortage of homes on the rental market.

Years of failing to build the amount of residential properties needed has squeezed rental costs up significantly in recent years, and now it seems that Osborne’s misguided housing market policy risks exacerbating the issue, as his outright assault on buy-to-let landlords ignores the fact that the private rental sector offers an essential service for millions of adults who choose to rent.

The decline in the number of rental properties available, owed largely to higher stamp duty costs and lower mortgage tax relief, is widely expected to place upward pressure on rental values, as reflected by the fact that two-thirds of ARLA agents predict that the stamp duty reforms will push rental values up for tenants down the line.

The data from ARLA also shows that although there was an 8% month-on-month rise in the volume of properties managed per letting agent branch, as a result of a surge in rental property acquisitions in the first quarter of this year, the number of rental homes managed per branch is still lower than the same time last year, down from 193 to 183. This is further indication that long-term supply is decreasing while also implying that more landlords may be trying to save money by cutting management costs.

David Cox, managing director of the ARLA, said: “It’s likely that this increase in supply is only temporary. At the end of April we saw a flurry of landlords seizing the last few moments before the stamp duty rise to complete sales, triggering an increase in the supply of empty rental homes to be filled this month.

“However, we expect that fewer investors will be taking on buy-to-let properties over the next six months, following the price hikes, meaning that once these properties are filled we’ll see supply nose-dive once again.”

BASTION ESTATES COMMENT: It is fact that buy to let landlords whether they own one buy to let property or have an extensive portfolio are having to ‘box clever’ in light of the tax changes and stamp duty costs, but it is merely a change and we have to embrace the change. The core question still stands: where can you secure a combination of growth and income from an investment with rising demand? The answer is almost certainly nowhere apart from the UK buy to let property market!

Working within a team of highly experienced property professionals means we as a team have experienced most things that the world of property can throw at us, including a property ‘crash’. Just like trading in shares, when you see the value drop you don’t sell in a panic, you hang on and watch the price rise again. Property has historically been the safest market and will continue to be so even in these changing times. Property is treated with great reverence as it steers much of the economy as a whole with the endless related business that both feed and benefit from the construction world.

Will there genuinely be a fall in buy to let investors buying due to the tax changes? Will home builders be in a position to lose the vital buy to let investor market? We think not! The substantial returns that owning a buy to let property are significant, the level of yields in far higher than most other investments and always buy with a discount so you have secured instant equity and a healthy buffer zone. Let’s not forget one of the key points of this article was about rising rents. This is inevitable as it’s simple supply and demand. We have covered this subject in a previous blog post.

Straight Talking – Forward Thinking.

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