Can tenants really afford a 30% rent rise ?
With constant changes in legislation, the new 3% stamp duty levy on BTL properties and the forthcoming changes in the tax relief system for landlords, a former independent member of the Bank of England's Monetary Policy Committee David Miles, now Professor of Financial Economics at Imperial College London has said that rents would need to rise 'between 20% and 30%' to offset the impact that the government changes threatened in the coming years.
Addressing the argument made by the previous Chancellor that the tax changes are about making it easier for first time buyers to enter the market, Miles says that â€œaspiring first-time buyers are hardly helped by squeezing the supply of rental property and driving rents up.â€ I cant agree with this point more, surely even the everyman can see that reducing the supply of new rental properties coming to the market and with ever increasing demand will only lead to higher rents.
He concludes by warning that â€œIt's strange to believe that having households channel more of their savings into US government bonds or into equity issued by German companies is to be preferred to their investing in providing rented accommodation in the UK.â€
Research conducted via YouGov late last year showed that almost half of renters CANNOT afford a 5% rent rise - let alone anything approaching the 20-30% put forward here.