0:01 AM, 23rd July 2024, About 4 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.
Beaver
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Sign Up11:13 AM, 23rd July 2024, About 4 months ago
Reply to the comment left by dismayed landlord at 23/07/2024 - 11:09
That's right. If labour attacked incorporated businesses that would be devastating for investment in the UK economy.
Dylan Morris
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Sign Up12:13 PM, 23rd July 2024, About 4 months ago
The new laws Labour will bring in will be under the “Tenants Rights Act” the name says it all. Labour have confirmed there will be no court reform before abolishing Section 21. I assume this bleak future also applies to large corporate landlords, Lloyds Bank, Aviva, Legal & General etc. It’s going to be absolutely mayhem for them as well. Yes they aren’t affected by Section 24 but if you can’t get your property back for 5 years (even for arrears) they could well start to pull out as well. And likely also BTL mortgage lenders will get cold feet and pull out of the market if they can’t realise their security within a reasonable timescale. It’s going to be pandemonium !!
Beaver
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Sign Up12:48 PM, 23rd July 2024, About 4 months ago
Reply to the comment left by Dylan Morris at 23/07/2024 - 12:13
I think that what Labour has missed in the proposals they put before the electorate pre-election is that if they did everything that the Red Queen wanted when she was in charge of opposition policy then this would overwhelm the courts.
One advantage that large incorporated businesses have is access to better professional advice and better legal representation. This means that they can win against tenants/councils/tenant representatives simply because they have a better understanding of the process.
However, if labour did everything that the Red Queen wanted then not only the large incorporated businesses, but also the smaller BTL landlords would have no choice but to seek legal representation in the courts. They would have to do this to avoid the devastating financial loss of a big chunk of their life-savings, and possibly all or most of their pensionable assets.
The only people who would benefit from this are lawyers; a small proportion of tenants gaming the system would benefit short-term, like those travellers who turn up and illegally occupy land knowing that the process doesn't allow them to be evicted for three months, and even then, only if the process is followed.
The majority of tenants would be penalised by these proposals. They already are being penalised because government and Bank of England policy are driving rents up and driving tenant-choice out.
Keir Starmer is a lawyer. Whatever the Red Queen wanted, he must understand what the consequences of overwhelming the courts would be and how many years it would take.
GlanACC
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Sign Up14:41 PM, 23rd July 2024, About 4 months ago
and the new Renters Reform Bill will force all private landlords to be under the a new housing ombudsman. This new power will decide on tenant complaints about repairs, etc BUT will not decide on contractual issues. Also a landlord cannot make a complaint about a tenant only a tenant make make a complaint about a landlord AND the ombudsmans decision is binding.- including any monetary redress.
Talk about a one sided approach and unfairness.
Beaver
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Sign Up14:44 PM, 23rd July 2024, About 4 months ago
Reply to the comment left by GlanACC at 23/07/2024 - 14:41
This is correct: If labour's proposals are implemented unamended without being moderated by both the House of Commons and the House of Lords, then in the short-term and medium-term the courts will be overwhelmed. And in both the medium and long-term the people who pay the worst price are actually going to be the normal tenants who are not gaming the system.
Lishraider
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Sign Up14:49 PM, 23rd July 2024, About 4 months ago
Reply to the comment left by northern landlord at 23/07/2024 - 10:49
😂
Lishraider
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Sign Up14:57 PM, 23rd July 2024, About 4 months ago
Reply to the comment left by Beaver at 23/07/2024 - 10:58It’s crazy that in this day and age the section 24 was even passed. It’s the only business that doesn’t allow you to offset your finance costs. It’s a corrupt world we live in.
I have one property in a personal name but my other properties are in a Ltd company. I am now being forced to sell the one that remains in my personal name because it’s no longer cost effective. I considered selling it to my Ltd co but the cost implications mean it would take me 16 years to earn back the money and that’s if they don’t start with this 50% CGT lark. I’m therefore cutting my ties with this particular property but can imagine that if this is your only investment it’s tragic.
In 2024 you have assets that you essentially have zero control over, how this is allowed is beyond me.
Beaver
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Sign Up15:21 PM, 23rd July 2024, About 4 months ago
Reply to the comment left by Lishraider at 23/07/2024 - 14:57
You are correct....I think the figures say that 30% of landlords have just one property, and the majority are small portfolio landlords who have 2-3. Most can't incorporate, for the majority of them it's tragic and the effects of what is an unjust policy are being and will be inflicted on tenants.
Lishraider
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Sign Up15:27 PM, 23rd July 2024, About 4 months ago
Reply to the comment left by Beaver at 23/07/2024 - 15:21Even those who have incorporated are now under fire with the DOTAS 🙄
GlanACC
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Sign Up15:32 PM, 23rd July 2024, About 4 months ago
Reply to the comment left by Lishraider at 23/07/2024 - 15:27
I am in the same position, 2 properties owned in a partnership (at least we can get 2 lots of CGT when we sell). Other 4 properties are in LTD company.
DOTAS is not an issue, as long as you don't attempt complex tax avoidance (not tax evasion note) schemes then you have nothing to fear.