Landlords have been spooked by government tax changes to the buy-to-let market, resulting in fewer residential properties coming on the rental market in July.
According to a survey by the Royal Institution of Chartered Surveyors (Rics), smaller landlords are pulling out of the market and this could mean 15 per cent rise in rent prices by 2023 if the supply of new rental homes continues to slow.
The July 2018 survey noted a 22 per cent increase in the number of respondents seeing a fall in new landlord instructions.
Simon Rubinsohn, chief economist at Rics, said that the impact of recent and ongoing tax changes to the buy-to-let market was having a “material impact” on the market.
“The risk, as we have highlighted previously, is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the Build to Rent programme or government funded social housing,” he warned.
“At the present time, there is little evidence that either is likely to make up the shortfall. This augers ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure.”
The government is in the process of rolling out a series of tax changes that impact the residential buy-to-let market. In April 2016, the government added a three percentage point stamp duty surcharge for private landlords and, a year later, removed tax relief on mortgage interest for higher rate tax payers.
Jazz Jhumat, a financial adviser at Danestone Mortgage & Financial Services, said the government needs to recognise the knock-on effects of discouraging landlords from the buy-to-let market, which will only lead to higher rent prices and affordability issues for poorer tenants.
She explained: “Any increase in landlords paying higher taxes will lead to these charges being paid from the pocket of the tenant. Where we have incentives for first time buyers, perhaps we should have a scheme to encourage first time tenants too.”
Ms Jhumat explained that she is still witnessing good demand for landlords in the North West for properties where they can derive a decent yield, but she acknowledged that more needs to be done to resolve the ongoing supply issues in the housing market.