The government reportedly wants to increase property taxes to help plug its £40 billion fiscal hole, but landlords have already demonstrated that such plans can have unintended consequences.
As a result of recent initiatives, some are leaving the sector, which has put upward pressure on rents.
The first example of this is the Renter’s Rights Bill, which is designed to protect tenants but, from a landlord’s perspective, could also make regaining possession of a property more onerous and raise the risk of void periods.
Second, stricter green regulations mean that rented properties must have an EPC C rating by 2030, which will mean more upfront investment.
It is therefore not difficult to imagine the reaction of landlords when a proposal was floated last month to charge them national insurance on rental income.
As well as the harsh economic reality for tenants of lower supply, those landlords that stay may pass on such extra costs in other ways.
“Some landlords have been spooked and are looking to sell,” said David Mumby, head of prime central London lettings at Knight Frank. “If the muted sales market means they can’t achieve their asking price, a number will come back to lettings. And that could accelerate quite quickly if November’s Budget puts further pressure on the sales market.”
Despite the prospect of more landlords returning, the switch to sales has become more apparent in recent months.
The number of new lettings properties coming to the London market in the year to August was 8% below the previous 12-month period, Knight Frank data shows.
Meanwhile, the equivalent change in properties on the sales market was +10%. Listings data in the capital from Rightmove paints a similar picture.
And as supply slips, rental value growth continues to hold firm.
Rents grew by an average of 2% in prime outer London in the year to August, which was the strongest figure since October 2024. An increase of 1.8% over a period of six months was the strongest such rise in 18 months.
Meanwhile, in prime central London, average rents rose by 1.5% over the year to August, which was the second-highest rise over the last 12 months.
Those drawing up the Budget and reportedly considering the National Insurance rise will hopefully remember the simple rule that if you tax an activity, you get less of it. If they don’t, it certainly won’t make life easier for tenants.
