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Rents in the UK are set to rise significantly faster than house prices over the coming five years, property agents Savills report.
The agency forecasts that rents will increase by 19% between now and 2021, whilst house prices will only go up by 13%.
In the capital, this gap will be even more noticeable. Here, rents are set to go up by 24.5% whilst house prices increase by 10.9%.
As the main reasons count post-referendum economic uncertainty and weaker consumer sentiment. For the coming year, Savills doesn’t forecast an increase in house prices at all.
However, prices in the north are set to outperform by the end of the five year period.
Simultaneously, demand for rental properties will increase, as first-time buyers continue to struggle with affordability.
Here an overview of the Savills results:
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RLA Looking For Landlord Support On This Most Important Issue
Sadly, the legal bid to force a judicial review of the Government’s controversial Mortgage Interest Relief – or Tenant Tax - plans failed at the High Court.
But all is not lost. While Steve Bolton and Chris Cooper have confirmed they will not appeal the decision, we at the RLA are continuing to lobby at the very highest level to persuade the Chancellor to rethink plans to stop buy-to-let finance costs being a legitimate business expense.
The RLA has been campaigning since the proposals were first announced in 2015. We have already met with Treasury officials to discuss the issue and have made a significant impact in Westminster.
There has been a surge of support from Tory backbenchers and we are continuing to campaign – asking that MIR changes be scrapped, or at the very least applied to new borrowing only, a move that will minimise the impact of these changes on established landlords. We have a further meeting with the Treasury scheduled and a round table meeting with Tory MPs ahead of the Autumn statement.
But we cannot do this on our own. It is vital that you contact your MP to explain the devastating impact that this unfair tax grab will have on you and your tenants. You can also ask to meet you MP to discuss the issues face-to-face.
An RLA survey of landlords showed these changes will lead to higher rents for tenants, see repair and maintenance standards slip and stem the supply of PRS housing at just the time when demand is soaring. This is bad news for everyone involved and we need to let the Treasury know that.
We have updated our template letter for all members to send to their MPs. Simply download it and use the empty box to talk about your own experience.
Or even better meet them in person. And if you do see them, take a photo and 'tweet your meet'. Don't forget to tag @RLA_News and your MP, if they have a Twitter account.
We need to spread the word to as many people as possible. Hundreds of landlords have already backed the campaign writing to and meeting with MPs and we are asking you to join them.
We need a last push ahead of the Autumn Statement. We need to hammer home to the Government just how devastating these changes will be and we need to stand together to oppose this unjust tax and fight for a fair deal for the PRS landlord.
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Ireland’s decision to scrap buy-to-let tax is a warning to Britain
As the UK prepares to change the way landlords are taxed by scrapping the existing rules that permit them to offset all of their mortgage interest from property investments against tax, Ireland has announced that it is reversing its policy that prevented landlords from claiming full mortgage interest tax relief on rental income to help stop rents soaring out of control.
In his Budget statement made last week, Ireland’s minister for finance, said landlords would be able to claim 80% tax relief from next year, up from an existing level of 75%.
Tax relief will then increase by a further 5% a year until it reaches 100% again.
Noonan highlighted the fact that the policy, which is similar to the tax changes due to be introduced in the UK from April next year, was introduced in Ireland in 2009 to “rescue the public finances” but with investment in Ireland’s private rented sector falling now is an “appropriate time” to revisit it.
Around 44,000 basic-rate tax payers will be forced into a higher tax bracket from april next year once planned changes to landlord taxation comes in to force, according to the National Landlord Association (NLA).
The existing rules that permit landlords to offset all of their mortgage interest against tax will, from April 2017, be phased out, restricting the amount of mortgage interest landlords can offset against tax on their property investments.
By 2020, landlords will not be able to deduct any of their mortgage interest from their rental income before calculating their tax bill.
The changes to tax relief will make it harder to make a profit from letting property, which in turn could deter investment in the sector.
Campaigners against the mortgage interest relief changes argue that Ireland’s change of policy demonstrates that the levy does not work.
Rents in Ireland have increased significantly since 2013, with recent figures from the Irish Residential Tenancies Board revealing that rents in Ireland have risen by almost 10% since last year.
Here in the UK, many landlords will have no alternative but to recoup their losses through higher rents, with tenants paying the price of the government’s tax-grab.
Research conducted by Property118 earlier this year revealed how up to 4.6 million tenants could be affected by the now former chancellor George Osborne’s tax attacks on buy-to-let landlords.
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Britain’s highest rental yields: the top 10 postcodes for buy-to-let
The huge rush to acquire buy-to-let property in the first quarter of the year ahead of the stamp duty change deadline at the start of April, after which a 3% surcharge was added for second homebuyers and buy-to-let investors, illustrated the growth in popularity of buy-to-let property as an attractive investment at a time of low interest rates and volatile stock markets.
The buy-to-let boom of recent years has fed the stereotype that Britons are obsessed with property. Ever since Margaret Thatcher declared her belief in a ‘property-owning democracy’ and introduced Right to Buy in 1980, the UK was converted into a country that saw houses as something to make money from, not just to live in.
Having long provided mega double-digit returns for investors, investment in buy-to-let has outperformed all major asset classes in recent years, with total annual returns from buy-to-let property hitting 12% in 2015 or £21,988 in absolute terms. But where are the best (and worst) rental yields currently achievable?
The new TotallyMoney Buy-to-Let Yield Map highlights the UK’s buy-to-let hotspots providing both an interesting insight into the market and a useful tool for buy-to-let landlords.
The research, which analysed 137,955 rental properties and 303,822 properties that were marketed for sale online on the 1st of October 2016, reveals a clear geographical divide between the North and the South of the country with northern regions coming out on top and the South East showing particularly poorly.
Nine out of the 10 highest yielding postcode districts are in Scotland and the North/Midlands regions.
The 10 lowest yielding postcodes, with the exception of Edgbaston and Holland Park in Birmingham, are all in Greater London, the South East and the South Coast.
The winning postcodes:
|Postcode||Post Town||Coverage||Average Rent||Average House Price||Yield|
|1||LS6||Leeds||Beckett Park, Burley, Headingley, Hyde Park, Meanwood, Woodhouse||£1,044||£116,115||10.79%|
|2||BD1||Bradford||Bradford City Centre, Little Germany, Goitside, Longlands||£552||£64,108||10.33%|
|4||PR1||Preston||City Centre, Avenham, Broadgate, Deepdale||£952||£125,810||9.08%|
|6||L7||Liverpool||City Centre, Edge Hill, Fairfield, Kensington||£720||£99,114||8.72%|
|7||M3||Manchester||City Centre, Deansgate, Castlefield||£1,230||£177,546||8.31%|
|8||S1||Sheffield||Sheffield City Centre||£823||£118,861||8.31%|
|9||HD1||Huddersfield||Huddersfield Town Centre, Hillhouse, Lockwood, Marsh||£656||£101,536||7.75%|
|10||CF24||Cardiff||Cardiff South, Rumney & Trowbridge||£1,220||£192,548||7.60%|
... and the losing postcodes:
|Postcode||Post Town||Coverage||Average Rent||Average House Price||Yield|
|867||BR2||Bromley||Hayes, Shortlands, Bickley, Bromley Common, Keston||£1,300||£788,293||1.98%|
|868||N21||London||Winchmore Hill, Bush Hill, Grange Park||£1,339||£825,700||1.95%|
|869||HA6||Northwood||Northwood, Northwood Hills, Moor Park||£1,732||£1,103,645||1.88%|
|870||B15||Birmingham||Edgbaston, Lee Bank||£1,013||£656,412||1.85%|
|871||W8||London||Kensington, Holland Park||£4,920||£3,320,116||1.78%|
|872||RG8||Reading||Goring, Streatley, Pangbourne, Whitchurch-on-Thames||£1,225||£865,454||1.70%|
|873||N2||London||East Finchley, Fortis Green, Hampstead Garden Suburb||£3,764||£2,733,640||1.65%|
|874||BH14||Poole||Lower Parkstone, Lilliput, Penn Hill||£1,288||£1,000,795||1.54%|
|875||N6||London||Highgate, Hampstead Heath||£2,779||£2,418,305||1.38%|
|876||BH13||Poole||Canford Cliffs, Sandbanks, Branksome Park||£1,574||£1,668,641||1.13%|
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The UK Is Heading For Another Housing Crisis
The UK is facing a "critical" rental shortage which requires a major policy rethink, according to the Royal Institute of Chartered Surveyors (RICS).
It says that almost 1.8 million new rental homes are needed by 2025 to keep up with demand.
The rental market is stagnant at the moment. RICS figures suggest that 86% of private landlords have no plans to add to their housing portfolio this year.
That's because buy-to-let sales have declined since April, when the government introduced an extra 3% stamp duty tax on second homes and investment properties. RICS says that 58% of estate agents have reported a decrease in buy-to-let sales since May.
At the same time, the number of households renting properties has grown rapidly due to rocketing house prices and relatively stagnant wages. The number of renting households increased from 2.3 million in 2001 to 5.4 million in 2014, according to RICS.
If that number keeps growing, there is going to be a major shortfall.
RICS called for the 3% tax increase on buy-to-let homes to be scrapped, although this move might upset first-time buyers, who often say they are outbid by buy-to-let investors.
Reversing the stamp duty increase would also incentivise "build-to-rent" schemes, in which firms construct apartment blocks and must pay stamp duty on each unit.
RICS also called on the government to encourage local authorities to release brownfield sites for build-to-rent schemes.
Brownfield sites are cheap areas of land previously used for industrial purposes.
The organisation's head of policy, said in an emailed statement the government should focus less on home ownership and more on the rental sector.
He said: "The private rented sector became a scapegoat under the previous prime minister, and because of that it suffered. Yet with increasingly unaffordable house prices, the majority of British households will be relying on the rental sector in the future.
“We must ensure that it is fit for purpose, and the government must put in place the measures that will allow the rental sector to thrive. Any restrictions on supply will push up rents, marginalising those members of society who are already struggling.”