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The continued housing shortage across the UK is hardly surprising, but according to the Royal Institution of Chartered Surveyors (RICS) rents could rise by as much as 15% by 2023 as the supply of new rental property dries up.
What has caused the rental property shortage?
A number of favourable tax reliefs have been stopped over recent years, including interest rate relief on buy-to-let purchases and the wear and tear allowance. Add to that the Government’s new SDLT surcharge of 3% in addition to standard SDLT, and it is easy to see why landlords are more reluctant to purchase properties – it is just too expensive.
Fuelling the squeeze
At the time the SDLT surcharge was introduced, it was criticised as being too strong an approach for investors, who are seeing increasingly squeezed profits. Many thought it would deter investors from the property market in the UK, but the Government dismissed this as pure rumour.
However, it seems those rumours are coming home to roost. It appears that the buy-to-let market has shrunk in the two years since the SDLT surcharge was introduced. In February 2016, one month before the surcharge came into use, there were 10,300 purchases of buy-to-let property in that one month alone. This was not out of contrast with average numbers, as in July 2015 it was 11,800 purchases.
Speed forward to April 2017 and there were just 5,300 buy-to-let purchases
What effect does this have?
If there are no investors to purchases properties, this causes a shortage of rentable accommodation. This complies with RICS’ findings, who said they themselves had also seen a steady decline in the supply of new rental property over the past two years. In fact ROCS’ Chief Economist has predicted a sharp rise in rents – in some areas of the country by as much as 15%. This could have a serious impact on people’s household spends and equally could force many people into a cycle of debt as incomes don’t match up.
If you would like any advice relating to your property, whether you are looking for conveyancing or other assistance relating to property law, contact Downs Solicitors to see how we can help.