A recent copy of the Metro gave as a headline ‘Fewer Homes up for rent after duty rise’. This is hardly a surprise to anyone who is involved in the private rental sector and found ambitions for extending their buy to let portfolios hampered, if not actually cancelled, by the recent increases in stamp duty.
The Metro gained their information from Property Partner, whose research found that the number of properties available to rent had dropped by 15.4 per cent in May, as compared to April. Many landlords rushed to complete purchases by 31st March. It would therefore have been logical to assume that by May, those additional properties would have been available to rent and perhaps should have shown a glut in the market.
In fact, the drop in available rentals was dramatic. Worcester saw the biggest drop, by 43 per cent, if analysis of availability listings for 89 towns and cities are to be believed. As Worcester enjoys high property prices, it is probably understandable that if this is having an effect, it is likely to be more obvious there. However, the drop in Bradford and Derby is 41 per cent, and neither of these areas will attract the high prices likely in Worcester.
There is also a lack of logic in the idea that a reduced number of properties is due to the stamp duty changes. Some of the properties bought in the pre-1st April flurry may have had existing tenants and been bought for the rental income. They would not have added to the properties available to rent, but should not have caused a decrease in properties available.
It seems more likely that landlords are taking the decision not to re-let properties when they become available, because of the continual attacks they suffer from legislation and from tenants, many of whom believe that rent arrears are an unfortunate fact of life, rather than their responsibility.
The short-term implication is that people looking for a home will find they have less choice. Generation Rent, forced into the private sector rather than home-ownership, will become the tenant of choice of landlords; the benefit dependent will be up against competition from workers, able to pay a hefty deposit. Who will take them? The worst landlords, that’s who, those landlords who have properties not good enough for workers. Do we really want to see this divergence?
The long-term effect is that landlords will face less competition and we know what that means in a market economy – rents will increase. Good news for those landlords who are committed to their lettings businesses – the probability of getting working professional tenants in their properties, paying higher rents. Bad news for all tenants, paying higher rents, with a decrease in available properties for the poorest.
For advice on buy to let issues – Ask Sharon