Prices Rise for Tenants as Landlords Leave Property Investment Sector

Reports that buy to let landlords are retreating from the property investment sector have fueled suggestions that private rental prices may soon rise for tenants.

The newly released TwentyCi National Homemover Audit has shown a 25 per cent drop in property exchanges for properties bought for buy to let. It is suggested that this decline is likely due to the rise in stamp duty costs, coupled with other restrictive measures including the fading out of mortgage interest relief. There has also been a tightening of mortgage lending rules, leading to many banks and building societies to insist on greater rental cover and higher deposits from landlords before they will grant buy to let mortgages.

These factors with regard to buy to let mortgages have combined to lead to a drop in purchases in the buy to let sector over the last 12 months. Whilst the aforementioned measures were arguably intended to free up the market for first time buyers, this sudden drop in availability has had a negative effect for tenants in the private rental sector. This is due to a growing supply and demand imbalance, placing upward pressure on rental prices due to lack of available rental property.

Founder of and consultancy Designs on Property Ltd, Kate Faulkner, said: ‘It’s interesting to see the impact of the government tax hikes on the landlord market. Although it may appear ‘good news’ initially that there are fewer buy-to-let investors, this is likely to back fire on tenants as where there is a shortage of rental properties, rents may rise. However, it’s also likely to hit the economy which is already slowing. A landlord spends thousands checking a property and letting it, supporting all manner of trades and letting experts. A loss of money in this sector will surely impact on earnings, and therefore on economic growth.’

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