Politics seems to always be a victim to the law of unintended consequences. In the summer the budget had measures to dampen down house price increases (to help people buy), but the consequences are likely to be making it more difficult to rent!
According to Savills, the estate agents, Britain will see steep rent rises over the next five years in rental prices. This is due to the government campaign against buy-to-let investing in the budget. Moves to put people off buying to let (to cut the demand for buying houses and thereby slow down house price rises) will constrain the supply of rental homes.
Savills, have said that London tenants face a 25 per cent increase to their rents over the next five years; renters elsewhere in the country will not fare much better, with a predicted 19 per cent rise! The result is that rental growth is now set to far outstrip house price growth. With the benefit of hindsight the moves to curb house prices probably were not needed any way. Brexit uncertainty will probably do that all by itself.
“The rental growth is largely driven by the mismatch between supply and demand,” said Lucian Cook, director of residential research at Savills. He added that moves to damp the buy-to-let market – which have included a stamp duty surcharge and plans to limit tax relief on mortgage interest payments – are pushing investors towards “higher yielding, lower demand markets”. this means the areas of highest demand such as London, face tightening supply.
What is worrying is that JLL, another estate agency group, also forecast steep rental growth, predicting a 17.6 per cent increase across the UK by 2021, with London rents rising 19.9 per cent, far outstripping predicted rates of inflation.
In a world where many cannot afford to buy anyway, renting looks like it is going to get harder too!