According to the latest Housing Insight report by Propertymark, the letting agents’ main representative body, the amount of rental properties available is alarmingly low. In September 2023, on average, each member branch had only 11 properties up for rent. And if you thought that’s a significant drop from the previous months, it’s interesting to note that these numbers haven’t changed much over the last year.
This might sound like a decent number, but here’s where the real problem lies: the amount of people looking to rent these properties far outnumbers the homes available. Even though there’s been a recent dip in new renters signing up, the demand is still outstripping the supply.
What’s Happening with Rents?
With more people chasing after fewer properties, you’d expect the rents to skyrocket, right? And you’re not wrong. A staggering 52% of Propertymark’s members observed a rise in rents in their branches in September 2023. But it’s not all doom and gloom – fewer agents saw rents rise in September than in the hotter months of July and August, where 71% and 68% reported increases, respectively. This suggests a slight cooling off, hinting at short-term stability in rent hikes.
Why Aren’t There Enough Rental Homes?
A key factor making it hard to increase the number of rental properties in the UK, as highlighted by a prior Propertymark report, is the financial challenges tied to buying a property to then let it out.
Here are some reasons for this hurdle:
- Higher property taxes on Buy-To-Let homes.
- Removal of tax benefits on mortgage interests.
- Getting rid of a 10% wear and tear allowance.
- Keeping Capital Gains Tax at 18% for rented homes (and a whopping 28% for those in higher tax brackets).
- An uptick in corporate tax.
To further break it down: previously, landlords used to get a tax relief on their mortgage interest. Now, this has been swapped with a 20% tax credit. Similarly, the wear and tear allowance now gives relief based on actual costs.
A Word from the Experts
Nathan Emerson, the CEO at Propertymark, expressed his concern on the current situation. He mentioned, “Governments all over the UK have been changing the rules of the game, making it less attractive for landlords. The outcome? Limited properties with a growing queue of eager renters. Though rents have been soaring, the recent figures do give a glimmer of hope, showing some moderation compared to the past.”