0:01 AM, 23rd July 2024, About 5 months ago 28
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Landlord purchases of rental properties have plunged to a record low, leading to a shortage of rental properties and rising rents across Great Britain, research reveals.
According to a report by Hamptons, just 10% of homes sold in the first half of 2024 were bought by landlords, the lowest level since records began in 2010.
This is a big drop from 16% in 2015, before tax and regulatory changes made buy to let investing less attractive.
The report blames several factors for the decline in investor purchases, including higher mortgage rates, political uncertainty and the threat of further rental regulations.
The firm’s head of research, Aneisha Beveridge, said: “Rather than a mass landlord sell-off, the lack of homes available to rent has been caused by fewer investors entering the market.
“Tax and regulatory changes introduced since 2016 have been the main culprit, but these disincentives to invest have been compounded more recently by higher interest rates and political uncertainty around the threat of more rental reform.
“If investor purchases and sales continued at 2015 levels, there would likely be 450,000 more private rental homes in Great Britain by the end of this year.
“This is roughly equivalent to the total number of homes in Birmingham.”
Ms Beveridge continued: “Most investor purchases this year have been driven by cash-rich, larger portfolio landlords who continue to expand their portfolios.
“The lack of supply is one of the main factors underpinning strong rental growth and this is unlikely to reverse any time soon.
“The challenge for the new government, which is keen to boost homeownership, is to increase security and the quality of homes for tenants living in the rental sector without disincentivising or pushing out more landlords.”
She adds: “While some of the homes that previously would have been bought by an investor have found their way into the hands of a first-time buyer, high mortgage rates and rising rents are likely to lock out many would-be homeowners over the next few years, keeping them in the rental sector for longer.”
Hamptons also makes clear that landlords have been put off investing by tax changes introduced since 2016, which increased the cost of buying investment properties and reduced profitability for some landlords.
As a result of fewer investors entering the market, the number of homes available to rent has shrunk considerably.
There were 42% fewer rental properties available in June 2024 compared to June 2016.
This lack of supply is pushing up rents.
The average tenant in Great Britain paid £1,347 per month to rent a new home in June, a 5.8% increase year-on-year.
This means rents are rising nearly three times faster than inflation.
Scotland has seen the biggest rent increases, with rents on newly let properties rising 11.1% year-on-year.
London, however, is experiencing slower rental growth, with rents in inner London even falling for the third consecutive month.
Julian Lloyd
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Sign Up9:55 AM, 23rd July 2024, About 5 months ago
who would have thought?
Penalise the supplier. They leave. Supply reduces. Demand increases. Prices rise.
Economics 101.
Elisabeth Beckett
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Sign Up9:59 AM, 23rd July 2024, About 5 months ago
So inflation is only been 2% since this time last year according to his article!!! What rubbish. Who writes these things?
Beaver
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Sign Up10:04 AM, 23rd July 2024, About 5 months ago
Reply to the comment left by Julian Lloyd at 23/07/2024 - 09:55
This is correct. However, this is the real trend:
“Most investor purchases this year have been driven by cash-rich, larger portfolio landlords who continue to expand their portfolios."
The changes that prevented small non-incorporated landlords from deducting their interest costs only penalised small landlords. Large incorporated investors do have to pay SDLT at the higher rate but they can continue to deduct all their finance costs. Smaller investors are also being penalised because they have to pay CGT not CT.
Pete England - PaTMa Property Management
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Sign Up10:19 AM, 23rd July 2024, About 5 months ago
From ChatGPT app:
Potential Solutions
1. Policy Adjustments:
• Review and potentially amend tax policies and regulations that have disincentivized investment in rental properties.
2. Support for Small Landlords:
• Provide incentives or support mechanisms for smaller, less cash-rich landlords to enter or remain in the market.
3. Increasing Supply:
• Encourage the development of new rental housing through subsidies, planning incentives, or partnerships with private developers.
4. Enhancing Tenant Protection:
• Implement measures to improve tenant security and housing quality without imposing excessive burdens on landlords.
Conclusion
The sharp decline in landlord purchases has created a tight rental market, pushing rents up across Great Britain. Addressing this issue requires a balanced approach from the government, aimed at supporting both landlords and tenants to ensure a stable and affordable rental market while promoting homeownership.
Beaver
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Sign Up10:22 AM, 23rd July 2024, About 5 months ago
Reply to the comment left by Pete England - PaTMa Property Management at 23/07/2024 - 10:19
That's right. The current policy favours the smaller number of larger, incorporated landlords and richer, non-leveraged landlords and penalises the majority of smaller leveraged landlords. It penalises tenants and penalises the less rich landlords.
northern landlord
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Sign Up10:49 AM, 23rd July 2024, About 5 months ago
No mention of the Renters Reform bill here. Surely the potential effects of this are discouraging investment. I would not volunteer to be a landlord now. Who would want to invest in an asset that you potentially have no control over and when you want to sell it you have to get a courts permission.. As our properties have become naturally empty over the last couple of years they have been sold, three have gone so far. If my remaining tenants gave me notice that they are quitting tomorrow I would go out and celebrate, sell up pay the CGT, stick the money in a safe interest bearing account and relax. How many are in the same position I wonder?
Julian Lloyd
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Sign Up10:53 AM, 23rd July 2024, About 5 months ago
Reply to the comment left by northern landlord at 23/07/2024 - 10:49
I’m doing the same thing.
Beaver
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Sign Up10:58 AM, 23rd July 2024, About 5 months ago
Reply to the comment left by northern landlord at 23/07/2024 - 10:49The effects of this are both discouraging investment, pushing up rents indirectly because the lack of investment will contribute to the lack of supply, and by penalising the smaller, leveraged landlords who are disproportionately affected by interest rate rises that do not affect the larger, incorporated, and non-leveraged (i.e. richer) landlords.
The smaller landlords on middle-incomes with leveraged buy-to-let properties using a BTL as a pension whilst they work doing something else have no choice but to raise rents higher BECAUSE they cannot offset the increasing finance costs against their rents.
This always was an unjust policy that penalised the majority of landlords and tenants alike. Rising interest rates really made this unjust policy bite and the people who were bitten hardest by this egregious nonsense were tenants.
GlanACC
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Sign Up11:00 AM, 23rd July 2024, About 5 months ago
Interestingly, just had occasion to drive round my large estate in Derby.
The number of 2 bed properties up for sale has grown over the past few weeks, and I can say for certain that most of them used to be rental properties.
dismayed landlord
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Sign Up11:09 AM, 23rd July 2024, About 5 months ago
Reply to the comment left by northern landlord at 23/07/2024 - 10:49
And me - now served notices to get the last 1 out. That’s from 19 - and most went to non landlords. I’ll not wait to be told I can not have my asset back when I want , nor who I can let to and have to agree to pets! If you’re a portfolio landlord with 10’s if not hundreds then you can handle it - you are a business. Let the government deal with the large landlords - see the tail then wag the dog!🤣