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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.”
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One-bed Properties Buck The Trend With Continued Rental Growth
Average rents for one-bed rental properties continued to grow during September, despite overall rental growth slowing last month.
Landbay's latest Rental Index shows that average rents for one-bed properties grew by 0.12% in September, up from 0.09% in August.
This equates to year-on-year growth of 1.57%.The figures, which are crunched by MIAC, reveal that overall rental growth slowed to 0.09% last month from 0.12% in August.
Average rents for two and three-bedroom properties also increased last month, but by a smaller margin than one-bed homes.
Landbay reports that average rents for one-beds in the capital remained flat during September, while overall average rents dipped by 0.04%.
The only other region to record a monthly decrease in average rents was the North East.
National annual rental growth now stands at 1.65%, according to Landbay, down from 1.83% in August.
The firm calculates that the average national rent during September was £1,187 (£747 excluding London and £1,891 in the capital).
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Manchester City Centre Rents Continue To Rise
City centre living is quickly becoming the norm in a lot of places and with Manchester’s population growing year on year and space and supply being very limited, Mancunian renters are currently experiencing more than a tough time.
The Manchester Evening News reported that estate agents claim that there are over 2,000 potential renters to just 130 properties in Manchester, leading to a ratio of 15 prospective tenants for every single property.
The MEN research overall discovered the following trends:
It is becoming more and more difficult for renters to find the perfect property, with up to ten enquiries for every city centre flat.
Each apartment to rent is receiving 3 or 4 offers.
Some properties are let after just ONE hour.
Prices are rising by up to £75 a month in some city centre hot spots.
The market is becoming increasingly competitive due to the significant shift in interest of Generation Rent to move away from London and live their life in Manchester.
City Centre Estate agents stated:
“The market has definitely become busier and we have noticed that Manchester is becoming increasingly popular with clients from all corners of the globe.Generally we receive between 5 and 10 enquiries per property then receive 3 or 4 offers on each of our properties on average.”
“To rent they have to close on the day, as we would have around 4 or 5 people to view the property on the day.”
“I have dealt with properties before in the city which have been on the market for only 1 hour and been let.”
This is however not all good news, as demand is outgrowing supply at an impressive pace, it’s becoming harder to find the right fit for everyone. This lack in appropriate accommodation leads to only one thing: a rise in prices. Rents in Manchester have continued to rise over the last 12 months, a change that has been felt most significantly in the city centre.
A City Centre Estate Agent said: “The market has changed massively in the last decade. Prices can range from anywhere between £750 – £2,500 a month. In terms of inflation, I would say the prices are going up around £50-£75 a month.”
“The old stories from 2005/2006 that Manchester was building more apartments than there was demand for is long, long forgotten.
“We can see that Manchester has a strong economy, helped with the relocation of the BBC and we are very positive about the future with the high speed rail links “shrinking” the distance to London.
“But the only way we can see Manchester City Centre being able to supply the apartments needed is for it to “grow” bigger, moving the city centre out towards those areas that were once considered on the periphery.”
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House Prices To Rise £40,000 In The Next Five Years Despite EU Tremors
The price of a home will still be around £40,000 more in five years' time despite the "tremors" caused by the Brexit vote, according to forecasts from one think-tank.
The Centre for Economics and Business Research (Cebr) said that while property values are expected to show weaker growth for the rest of 2016 and into 2017, the general direction of prices is still expected to be up.
The increases mean the average UK house price could rise from £194,000 in 2016 to £234,000 in 2021 - a jump of of £40,000.
The economic forecaster said despite "post-Brexit tremors", house prices are set to increase by 5.7pc over 2016 as a whole. Earlier this year, annual house price growth was running as high as 8pc, but Cebr expects to see a slowdown in house price growth over the second half of this year.
This slower growth will be caused by a three percentage point stamp duty hike which came into force for buy-to-let investors on April 1, combined with the general economic uncertainty following the referendum vote to leave the EU.
Next year, UK property values are forecast to increase at a slower pace of 2.2pc - although in London house prices are expected to fall by 5.6pc in 2017.
Cebr said London house prices are expected to increase by 6.8pc across 2016 - and after a blip in 2017 they are expected to return to growth there in 2018 and beyond.
It said the top end of the London housing market, which has attracted strong interest from foreign investors in recent years, was "showing cracks well before the vote on June 23".
Cebr said: "Some of the global regions that many of London's non-UK buyers come from such as Russia and the Middle East are experiencing economic turmoil and are not as able to invest."
Many housing market reports have pointed to a lack of available properties helping to keep house prices up. Cebr said it expects the impact of Brexit on the housing market to be smaller as Brexit negotiations progress.
The expectation is in line with Cebr's central view of the negotiations progressing relatively smoothly, with the UK ultimately maintaining a close economic relationship with the rest of the continent, without necessarily agreeing to an unrestricted flow of labour or goods and services.
Beyond 2021, housing market developments will depend heavily on the immigration and economic policies the UK negotiates with the rest of the world, Cebr said.
"Although Brexit has certainly sent shockwaves, Cebr expects the housing market to slow down but not plummet. Years of underbuilding mean that demand would have to fall very dramatically to meet the low level of supply increases. "Keeping in mind that construction companies are very likely to limit their output further in light of Brexit, price pressures will also come from the supply side."
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Loophole that lets landlords dodge buy-to-let curbs: Six in ten invest
through limited companies to avoid the new rules