Rental market drying up could result in 15% rent rise
According to a survey by the Royal Institution of Chartered Surveyors (RICS), rents could rise to 15% by 2023 as the amount of new rental properties fades.
The survey said that small scale landlords are pulling out of the rental market while tax changes which were brought in last year were blamed as it had made buy-to-let investments less profitable.
RICS stated that the Government should investigate the way private rented sector was regulated.
RICS’s members have noticed the supply of new rental property dropping steadily for two years – however, most of its members have seen increases in the number of people looking to rent, although those numbers are evening out.
RICS chief economist, Simon Rubinsohn, said: “The risk… is that a reduced pipeline of supply will gradually feed through into higher rents.”
A spokesperson for the Treasury said tax changes were implemented to make more houses available to homebuyers. The spokesperson said: “We want to realise the dream of home ownership for a new generation, and that’s why we introduced a cut to stamp duty for first time buyers and have built 1.1 million additional homes since 2010.”
While Labour’s shadow housing secretary, John Healey said the Government was responsible for “eight years of failure”. He said: “It’s staggering that Conservative ministers still have no answer to the increasing pressures private renters face.
“Labour in government will fix this broken market with bold new rights for renters including an end to no fault evictions and controls on rents.”
Mortgage tax relief for landlords will be limited to the basic rate of income tax by 2020 due to the buy-to-let tax regime changes brought in last year.
RICS believe the full effect of the changes and increases in stamp duty have yet to be felt by the industry.
RICS policy manager, Abdul Choudhury, said: “Withdrawing tax breaks that small landlords relied on, placing an extra 3% on second home stamp duty, and failing to stimulate the corporate build-to-rent market, has understandably [had an impact on] supply.
“[The] government must urgently look again at the private rented sector as a whole, including ways to encourage good landlords.
“Ultimately, [the] government must consider the impact of its policies, and if the wish is to move away from the private rented sector, it must provide a suitable alternative.”