The leading landlord associations are warning that the Government’s strategy for the housing market will backfire because the Budget did not provide any relief for the buy-to-let market.
The Residential Landlords Association (RLA) and the National Landlords Association (NLA) are convinced the latest Budget has failed tenants. They claim that recent BTL restrictions have resulted in a critical shortage of rental accommodation, leading to higher rents.
Both associations, soon to merge to become the National Residential Landlords Association (NRLA), issued the warning after last week’s Budget statement. They had each recommended that the Government take action to support the private rented sector (PRS) but, apparently, to no avail.
Ministers need to react
In a statement, they said that the Government was weakening its efforts to increase home ownership by turning its guns on the PRS, and that by restricting supply and thereby making renting more expensive, it is the tenants who are the worst affected.
Ministers, they added, need to realise the enormity of the damage their tax measures are inflicting on the PRS and instead support landlords to provide the new homes for private rental that are so desperately needed.
In addition, the Help to Buy scheme has enabled thousands of would-be owners to get onto the property ladder. Some who were not first-time buyers have benefited, even though the scheme is intended for those who want to move from renting to buying.
The most recent promise was of a 30% new home discount for key public sector workers, although Chancellor Rishi Sunak did not mention this in his Budget speech.
Rents set to rise
Nevertheless, the landlord associations have been joined by Arla Propertymark, Hamptons International, Zoopla and the Royal Institute of Chartered Surveyors (RICS), all voicing similar sentiments regarding the Budget.
Rents are set to rise across the UK, according to the most recent RICS residential survey. The number of available homes for rent is diminishing while tenant demand escalates, and if the trend continues, rents could rise by as much as 3% by 2025.
Foreign investors in UK property will be required to pay a 2% stamp duty surcharge from April 2021.
Some propose that this additional revenue should be used to reduce the stamp duty burden on landlords, arguing that high rents simply make it more difficult for tenants to save for a deposit, even though the Government’s stated aim is to increase home ownership.
Rosy outlook for majority of landlords
Surprisingly, UK BTL landlords remain reasonably relaxed about recent changes in the market as, despite Brexit, the rental sector has shown itself to be remarkably robust. Housing markets in the regions especially have performed well, with the North West, Midlands and Yorkshire continuing to attract increasing amounts of investment, businesses and residents.
This could be due to a combination of rising demand and falling availability. Yet landlords are keener than ever to encourage tenants to stay for longer periods by offering them security.
Consequently, the BTL market is becoming professionalised with more properties owned by fewer landlords. And more landlords are operating through limited companies as tax changes such as Section 24 start to bite.
So these changes could further reduce the already low number of ‘rogue landlords’, paving the way for those who regard property rental as a profession.
As a final thought, the short-term and furnished holiday let industry is growing. The tax rules governing these homes compared to a traditional buy-to-let are significantly more generous, which must be a plus for many landlords.
As ‘staycations’ increase in popularity and demand for this type of accommodation rises, holiday homes could prove to be a lucrative form of investment.