Demand means UK needs more rental homes

Demand means UK needs more rental homes
The UK faces a fresh supply crisis in terms of rental properties, and may need 1.8m more to meet demand. The Royal Institute of Chartered Surveyors (RICS) has noted that buy-to-let sales had slowed since changes to stamp duty rules earlier in 2016.

RICS found that councils and housing associations now lag behind the private rented sector in terms of number of homes provided, but the summer slump in sales means that, as the main provider, supply is now lower than it should be.

Meanwhile, analysis by accountancy firm PwC suggests that the UK will have 7.2m households in rented accommodation in 2025, up from 5.4m in 2015 and just 2.3m in 2001.

RICS's fear is that sales for rented properties will continue to fall going into 2017 - when new landlord taxes go live - and has urged the government to find ways of focusing on affordability of homeownership where possible.

Jeremy Blackburn is RICS's head of policy. He said: "The private rented sector became a scapegoat under the previous Prime Minister David Cameron, and because of that it has suffered. [Nevertheless] the majority of British households will rely on the rental sector in the future.

"We must therefore ensure that it is fit for purpose. Any restrictions on supply will push up rents and marginalise those members of society who are already struggling."

Where does this leave UK landlords, already a part of the private rental sector? There will be some good news for them, in that their rents may naturally face upwards pressure if sales continue to stagnate.

Furthermore, the decrease in sales implies a decrease in demand - if demand is indeed lower than it was earlier in 2016, asking prices could also drop for those looking to expand their portfolio. Rightmove's September House Price Index shows house prices have stayed steady since June's EU referendum vote, up 0.7% from August.

Given the months of house price growth that occurred from 2014-15, this now represents a good chance to invest where perhaps there had not been an opportunity before - and before house prices start to increase again.

And who is competing for those properties? Mainly first-time buyers who are not as cash-rich as landlords. The Rightmove house price index showed that first-time buyers are facing a monthly jump of £6,240 in properties new to the market, a 3.3% increase over August and 10.5% in the year, so they continue to be priced out at £194,477 for a first-time property.

Landlords can also look to the impending conclusion of help-to-buy as an indicator that the market may see increased prices and demand returning next year. The government-led mortgage scheme will close on 31st December 2016, shutting some people out of the affordability bracket going into 2017.

Therefore lower demand and inertia of the property market as a whole may put a stopper to many deals before the turn of the year, giving landlords the chance to push through purchases before demand and confidence return in 2017.

To find out more about your local property market and options to expand an already existing portfolio, please contact your local Martin & Co office today.