Rents to Rise as Demand Outstrips Supply

Rises in rental prices in the United Kingdom are predicted to pick up their pace in the next five years, according to a new survey by the Royal Institution of Chartered Surveyors (RICS).

While property values are expected to grow by less than 20% in that period, RICS predicts that rental prices will go up by over 25 per cent. This could mean good news for landlords who may be able to get more out of their rental portfolio.

More and more demand, less and less supply

The last three months of 2016 saw the demand for rental properties among tenants continuously increasing.

In addition, the ARLA Propertymark group reported that the number of prospective renters who were newly registered with letting agents increased by as much as 31% in January.

At the same time, RICS predicts that landlords will continue to shrink their portfolios over the course of 2017, giving fewer properties for tenants to pick from, and pushing rental prices up. The last quarter of 2016 was the fourth in a row that saw a drop in new listings on the rental market, according to RICS.

This is because many buy-to-let investors are selling properties, with house prices in general at all-time highs, and in light of some of last year’s unfriendly legislation. For more information read: 

Among these are Fergus and Judith Wilson, the biggest landlords in the country, who pointed to the increased stamp duty as putting a pinch on their rental operations. They said that this, and newly tough rules on mortgage lending, meant that the prospects of landlords will be increasingly grim in the UK.

This all means that rental prices will continue to increase, with letting agents reporting rental rises of as much as 23% in January, according to ARLA Propertymark.

Possible encouragement for landlords?

While the RICS survey’s outlook was relatively gloomy for landlords, the government’s housing white paper, which was released shortly thereafter, seemed to promise some encouragement for the buy-to-let market.

The government put emphasis mainly on getting developers to invest in large-volume rental properties and "family-friendly" tenancies.

RICS’ head of UK Policy, Jeremy Blackburn, said that some sort of "turbo-boost" for build-to-renters would be necessary. He called for an end to "punitive measures" that work against landlords who are making an effort to increase the country’s rental stock.

He added that the government needs to avoid enacting conflicting legislation, like pushing the ban on letting agent fees while also trying to force longer tenancies. Blackburn pointed out that moves like these were sending mixed signals – and therefore creating uncertainty in the sector.

The RICS survey found that 25% of surveyors saw house prices rise in January. This trend is expected to continue in the next year across the country, with the exception of the capital.

All in all, things continue to be uncertain for the buy-to-let market, as Brexit and last year’s policy changes begin to take full effect. It remains to be seen what’s in store for landlords in the year to come.

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