Rental prices to increase as landlords adapt to changes

Rental prices to increase as landlords adapt to changes

It is likely that rental prices will rise as a result of private rented sector landlords adapting to changes that were implemented by the Government this year.

Changes have been made to stamp duty, immigration checks have to be carried out, tax changes are on the way and lending conditions have been tightened and that means that landlords have a lot to contend with.

However, their confidence is high as many believe that their portfolios will continue to grow and work for them. They have done all they can to alleviate the additional costs associated with tax once the relief on mortgage interest payments is lowered.

Landlords are now beginning to turn to incorporation and borrowing via a limited company structure so that they can offset costs against rental income. As the new tax changes come into effect, it is likely to lead to an increase in rents. The average rental price is £881 per month even with the supply of rental property hitting an 18 month high.

Around a third of landlords expect to see a rise in rental costs. Demand is increasing and the recent budge announcement to put a stop to letting fees will lead to additional costs being added into the rental cost.

Landlords will also be faced with having to find higher deposits as well showing how they will receive returns that are sufficient enough to cover costs in order to secure finance.

The stamp duty changes had an impact on the market and with the upcoming tax changes, landlords have really been hit hard. Their confidence is growing as they look to find ways in which they can reduce the damage. This has seen an increase in the use of limited companies as well as a rise in rents, regardless of the increase in supply.

The market for buy-to-let properties for sale still has more to come with the new underwriting standards as well as the tax changes and possible interference from the Bank of England. If all of these changes cause problems for the growth in rental properties, then it will simply worsen the housing crisis.

All of these measures have been brought in to help increase the number of people who own a home, however, the changes could have the opposite effect. There will be increased upward pressure on rental prices as well as the potential drop in incomes all of which leads to a lack of affordability.

The warnings have been there from the start, how these changes will have a negative effect and this is already being seen. While the ban on high letting fees is welcomed, it does mean that the costs will be passed onto tenants and that will not help the cost of renting to decrease.

To combat the rising house prices and rental prices, a practical and thorough programme will have to be implemented across all tenures. There has been more support provided by the Chancellor for house building the support is not sufficient enough to help alter the supply that is required.

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Author: hopwoodhouse

Hopwood House are property investment specialists, helping investors find the right buy to let and investment properties in the UK and all over the world. For more information or to browse our range of investment opportunites, please visit Hopwood House.

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