A RICS members’ survey shows that fewer landlords are entering the buy-to-let market while others are leaving it, resulting in reduced supply and ultimately higher rents will follow.
The Royal Institution of Chartered Surveyors says that the most striking feature of its July 2018 survey is the continuing reduction of new property being bought by landlords following two years of rental sector investment decline.
Lettings data returned by RICS members shows the continuing impact of the landlord tax changes on supply of rental property, reflecting a major national shift in the buy-to-let investment market following years of continuous growth.
But whilst the supply of rental stock is increasingly constrained, tenant demand shows no signs of abating, a consequence of which RICS concludes will be rental growth, rising rents for tenants.
Over the next twelve months, RICS says, rents are expected to increase by an average of around 2% nationally. But on current supply / demand trends this could force a cumulative national average rent increase of around 15% in the next 5 years.
So, in the absence of either a significant increase in the Government’s Build to Rent programme, or more local authority funded social housing, of which there is little evidence for both so far, it is unlikely the rental shortfall will be made up.
This may be some good news for those landlords who are prepared to stay the course, but not so for the many financially strapped tenants unable to save for a deposit in order to buy, and who are therefore looking to rent for the long term.
“While the current focus is rightly on using regulation to improve the experience for tenants, Government must urgently look again at the PRS as a whole, including ways to encourage good landlords.
“Ultimately, Government must consider the impact of its policies, and if the wish is to move away from PRS, it must provide a suitable alternative.
“If they wish to improve PRS, as we have suggested by professionalising through regulation and the PRS code, there is justification to reconsider the approach taken to tax,” says RICS.