RENTS SET TO INCREASE BY A HUGE 20% BY 2022
Mar 20, 2017
Rents are expected to soar by more than 20% in the next five years as landlords sell up investment properties in the light of tax changes.
The Royal Institution of Chartered Surveyors (RICS) has warned that the shortage of homes on the market to rent was continuing to grow with the tenant demand exceeding for 38 months running in February.
With the new tax changes and laws coming into play this April, RICS are predicting a continuing negative trend.
House prices are expected to increase but at a slightly slower rate of 18% over the next 5 years.
Why is this happening?
Well, put simply the gap between supply and demand is pushing rents higher.
With the reduction in the amount of mortgage interest tax relief that can be claimed as well as various other landlord tax changes coming into effect as of April this year, it is becoming more and more expensive to be a landlord, causing some to leave the sector and sell up. It also doesn’t help that mortgage lenders criteria for buy-to-let mortgages are making it harder for aspiring landlords to enter and existing landlords to expand their portfolios.
The demand for rental property is also increasing due to the uncertainty that Brexit brings – causing people to put aside plans to buy a home.
New buyer inquiries had been decreasing in recent months and were flat in February, says RICS.
Tenants are most affected by the rent increases, especially those who are trying to save to get on to the property ladder. Those on lower incomes look set to be hit particularly hard by the increases.
Sean Tompkins, chief executive of RICS, said: “The housing market is falling increasingly out of step with the majority of household incomes.
“In the current climate, it can be hard enough for young professionals to make ends meet. But for those on benefits, the pressures may be insurmountable.”
Sounds interesting. What’s the background?
The buy-to-let sector has been hit by a number of tax changes in the past year.
Last April, the Government introduced a 3% stamp duty surcharge for people buying a second property, while also abolishing the 10% tax relief for ‘wear & tear’ on rented out furnished properties.
A recent survey carried out by the Council of Mortgage Lenders (CML) found that 19% of landlords planned to hike rents to cover the cost of being able to claim back less mortgage interest tax relief from April, while 5% said they had already done so.