UK rents are expected to increase by 7.5% over the next three years, as the supply of rental accommodation dwindles while demand from tenants continues to rise, according to Countrywide.
With some landlords selling up following unfavourable tax changes, including the phasing out of mortgage interest relief and the additional 3% on stamp duty on second homes, at a time when more people are looking to rent, partly because they cannot afford to buy their own homes, the property group says that the widening supply-demand imbalance will inevitably push up rents.
Countrywide estimates that rents are likely to rise 2.5% in 2019, followed by growth of 3% in 2020 and a further 2% in 2021.
Countrywide says that since the 3% stamp duty surcharge was introduced in April 2016, 120,000 more landlords have sold their buy to lets than purchased new properties and this is contributing to low stock levels in the rental market.
A recent survey of over 3,000 landlords carried out by the Residential Landlord Associations’ (RLA) Private Renting Evidence, Analysis and Research Lab (PEARL) found that 68% of private landlords were being deterred from purchasing any additional homes to rent as a result of the 3% stamp duty levy.
The measure was introduced by the now former Chancellor George Osborne to create what he at the time described as a “level playing field” between landlords and those buying homes to live in.
But the extra stamp duty has left many landlords with little alternative but to pass costs onto tenants by pushing up rents, at a time when demand for private rented housing is only likely to increase, according to the RLA.
RLA policy director, David Smith, said: “The previous Chancellor introduced the stamp duty levy to support first time buyers, yet the figures show this simply is not happening.
“Many of those looking for a place to live are facing a perfect storm – good landlords not prepared to invest in new homes to rent, whilst those same people are unable to access home ownership sectors.”
A separate prediction report issued by RICS suggests that rents will increase by 15% over the next five years.