Will government interference in BTL drive rents up?

Will government interference in BTL drive rents up?

A new report conducted by Belvoir has confirmed that Government policies aimed at cooling the Buy to Let market are making landlords cautious about their future investment plans for 2016, increasing pressure on the Private Rental Sector.

Furthermore, although 68% of landlords surveyed had not raised their rent in the last 12 months, 86% believe that increased purchasing costs for investment properties will inevitably lead to increased rents.

Dorian Gonsalves, Belvoir's Managing Director, said: “The Belvoir Landlord Survey was created to help form a projection of where landlords believe the rental market is heading in 2016. The survey ran from mid December 2015 to mid January 2016 and we invited all landlords, not just those who are clients of Belvoir, to respond to an on-line questionnaire. We received a total of 1038 answers and many of these concurred with Belvoir's predictions at the start of this year. Analysis of the Belvoir 2015 Q4 rental index also confirms many of the results of our survey.

The majority of landlords who responded to the survey were investment landlords with one to ten properties, and 93% of these rental properties were located in England. When we asked landlords how changes to stamp duty and taxation were likely to influence their investment plans for the next 12 months, 44% responded by saying they will be adopting a cautious approach to further investment.

A total of 68% of landlords had not increased their rents at all in the last 12 months, and almost half of those surveyed have no plans to increase rents in the next 12 months. This was reflected in Belvoir's rental index for Q4 2015, which showed that even in areas where supply is lower than demand, rents are only able to rise in line with wage increases and what people can afford.  Most agents reported a modest increase of around 3% in the last quarter of 2015 and are anticipating a continued trend in 2016.


However, 88% - an overwhelming majority of landlords - believe that increased purchasing costs for investment properties, due to a rise in stamp duty and lack of BTL mortgage tax relief, will ultimately lead to increased rents.

Landlords are almost equally divided in their views as to whether they think BTL remains a good investment for new people coming into the market. A total of 46% thought it would still be a good investment and 40% thought it would not, with 14% undecided.

When asked what effect on the PRS the Government's drive on home ownership will have, the results were varied, with some landlords predicting a slowdown and others predicting minimal effect, as so many people are not in a position to buy their own homes or prefer the freedom of renting. There were also concerns that many landlords would get rid of potentially uneconomic property portfolios, resulting in a shortage of rental property and large rent rises.

The majority of landlords named George Osborne's anti-landlord policies as the single largest challenge that landlords will face in 2016. This is entirely in line with my prediction that Increased Government interference in the BTL market will put a real squeeze on the supply of property in the rental market in 2016 and beyond.

The Belvoir rental index for Q4 2015 shows that many of our franchise owners across the country are not reporting a mass exodus of rental properties from the market. Of those that are leaving, many are accidental landlords who are anticipating being hit by the impending loss of mortgage interest relief.  In many areas, including Wales, there has been increased activity with landlords looking for advice to buy further properties before the stamp duty increase kicks in.

In cities such as Cambridge, where the population is increasing, there are strong capital growth opportunities for investors despite changes to stamp duty and tax allowances. In the South East stock levels are tight with more pensioners investing before the stamp duty rises. In areas such as Weston super Mare demand remains consistently high with a high proportion of people opting to rent versus buying, making this a great area for investors to benefit from high yields and capital growth.

A reputable agent is now an invaluable resource, and I would encourage landlords to seek free, professional advice prior to making any decisions about their portfolio.”

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Comments

  1. Solicitor2FlipperSolicitor2Flipper10 February 2016 10:17:55

    I think it will, and is the very reason why I am having a bit of a change of mind. Before the SD surcharge announcement, I was determined to stop letting. Now, I think perhaps all is not lost - thanks to Mr. O's policies (albeit unintended for this result) which will inevitably shrink supply in this elastic market.

    Reply to this comment

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Latest Comments

Spencer Fortag
Spencer Fortag 25 Aug 2016

The funny thing is, I mentioned the brick issue in my blog back in April: http://medwayproperty.blogspot.co.uk/2016/04/the-medway-property-market-and-lack-of.html

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SecomTech
SecomTech 19 Aug 2016

Firstly, I either lodge with DPS or do not take a deposit...secondly, If a tenant has not received a confirmation their deposit is secured with either a scheme or in an insured account with an agent/landlord,...

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jasonevans
jasonevans 19 Aug 2016

Belvoir has over 15 years of experience in property lettings, buying and renting and is one of the best agencies I know about. I have heard that they revived an award for the hard work. Really amazing...

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jasonevans
jasonevans 19 Aug 2016

Usually these areas are least affected when it comes to unexpected economical collapse.

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TheWaspNestRemover
TheWaspNestRemover 11 Aug 2016

You agree to pay for the treatment needed to get rid of fleas, ants, mice, wasps nests and other pests unless you can prove that these are a result of us not meeting our repairing responsibilities or these...

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madisonwelch80
madisonwelch80 02 Aug 2016

16% is quite a raise. Let's hope this tendency won't continue for long.

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madisonwelch80
madisonwelch80 02 Aug 2016

?66,963 is a serious price drop However buying a property it a serious investment only small percentage of the UK population could afford.

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madisonwelch80
madisonwelch80 02 Aug 2016

Wow, it kind of surprised me. I mean counting on mom and dad's bank even after retirement is too much. That's the moment in life when one should have ensured themselves. I am shocked.

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AbbieP.
AbbieP. 22 Jul 2016

"While house prices in the most expensive eleven boroughs have declined values in the cheapest eleven boroughs continue to rise" - not a nice way to even out the price range. London is overrated as it

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AbbieP.
AbbieP. 21 Jul 2016

And try to profit from your decisions, I may add

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CommercialTrust
CommercialTrust 19 Jul 2016

Retirement investment has always been one of the biggest draws of buy to let. And the buy-to-let demographic is, on balance, older. (Over a third of our applicants are over 50 at the time of application.) It...

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Forrest Wheatey
Forrest Wheatey 11 Jul 2016

I find the time perfect for ever home-owner wannabe. Prices should slowly, but steadily drop, at least for the inner buyer. Making it harder for outsiders to buy properties (the whole Brexit thing means...

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