According to Propertymark, the average number of properties available to rent per member branch in September 2023 has remained consistent with August 2023 figures, resting at 11 properties. This might seem like a stable market on the surface. However, diving deeper, we find that these supply levels have barely fluctuated over the past year. But is that necessarily a good thing?

Demand Continues to Outstrip Supply

The stability in property availability doesn’t tell the full story. There’s a mounting pressure from the demand side. Despite seeing a slight downward trend over the recent months, the number of new applicants registering for properties continues to exceed the number of available properties. This supply-demand imbalance, as one can expect, is influencing rents. In September 2023, more than half (52%) of Propertymark’s surveyed members reported an increase in rents at their branches.

However, there’s a silver liningfor tenants . The pace of rent hikes seems to be slowing down. September saw fewer agents (compared to July’s 71% and August’s 68%) reporting a rise in rents. This suggests a short-term restraint in rental growth.

Underlying Factors Impacting Property Availability

Why is there such a tight grip on property availability, you ask? Propertymark’s previous position paper highlighted a few significant hurdles. Primarily, the financial challenges and barriers in purchasing a buy-to-let property are causing the squeeze.

Here’s a breakdown of some financial barriers:

• Property Tax: Higher tax rates for buy-to-let properties.
• Mortgage Interest: The withdrawal of tax relief on mortgage interest has been a significant blow. It’s now replaced with a 20% tax credit.
• Wear and Tear Allowance: The removal of the 10% wear and tear allowance and its replacement with at-cost relief has implications on a landlord’s bottom line.
• Capital Gains Tax (CGT): The maintenance of CGT at 18% for rented properties and an even heftier 28% for higher rate taxpayers adds to the financial burden.
• Corporation Tax: An increase in corporation tax further deters potential landlords.

Government Interference: A Double-Edged Sword?

Nathan Emerson, CEO at Propertymark, commented on the ongoing legislative changes affecting the property market. He mentioned, “Governments across the UK continue to tinker with legislation and legislative programmes, often disincentivising landlords in the process.”

This sentiment reflects a broader concern. While regulations are essential for maintaining a balanced property ecosystem, there’s a growing feeling among stakeholders that continuous alterations might be dampening the spirit of potential landlords.

To wrap up Emerson’s thoughts, “Supply remains tight with far more applicant registrations than properties available. Pressure on rents continues although there are some signs of restraint in this month’s figures compared to last month.”

In Conclusion

The UK rental property market is undoubtedly experiencing tight supply conditions, with demand continuously outpacing availability. For those considering entering the buy-to-let market, it’s essential to stay informed, understand the financial implications, and navigate the legislative landscape effectively.