We have seen a massive increase in the UK’s rental property market, in mainly the south. Bearing that in mind now would be an excellent time to become a Landlord and invest in a property. Unfortunately, it isn’t that simple to do so. There has been a noticeable reduction in the number of Landlords across the UK, with a seven-year low. But what is causing this?
Increased Competition Caused by Supply Not Meeting Demand
In London in 2019, it was noted that there were roughly 6.1 people interested in being a tenant for every rental property on the market. This shows an increase of 4.7%. Because of this, it is more common to see bidding wars and the price that tenants pay being higher than previously seen. It has been noted that some people are also paying 20% above the asking fee.
Because people know there is more competition and less available many are happy to pay more for individual properties. So you’re probably thinking, why hasn’t this resulted in more landlords? It’s because of how the government taxes the landlords with buy-to-let properties.
Why have Landlord Numbers Dropped
Data recorded by New Hamptons show a significant drop in the country with a seven-year low. There were 2.6 million landlords in 2019, a decline of 222,570 since 2017, so this is the lowest number since 2012.
What is the cause of this decline? It began as the government created stricter taxation policies for landlords. In 2016, a stamp duty surcharge of 3% was introduced. In 2017 there was an incremental decrease in buy-to-let mortgage tax relief. This will continue to accumulate when 2020 comes along, and landlords do not have the opportunity to counterbalance any interest fees on their mortgage against their tax bill. According to the new guidelines, a tax credit will be on 20% of the costs.
What the Landlords Did Next
Due to the tax and charges, many landlords were forced out of the buy-to-let market. As some holiday homes are still eligible for tax perks, some people moved to the holiday letting market.
Some of the others are just selling their available stock, and after there were 15.5% fewer new lettings listed in the London area.
This could also cause many landlords based in the south to invest elsewhere. For example, move to the north to search for better returns.
What Does This Means for Renters
Because of the viewer landlords with stock, more considerable competition and increase in rent prices, this has had a knock-on effect on renters. This January, the average rent price has increased by 6% in the South West.
Depending on the location of landlords, the rising rental charges can be beneficial to them.
What is Going to Happen Next?
Predicting the future is hard, but it is seen that landlords who haven’t moved on to other sectors are increasing the number of properties they own by buying more, some of which are using the Help to Buy scheme. 30% of landlords in the UK in 2019 held two or more properties being, the highest level recorded. It looks like it will continue this way in the future.