Rents are predicted to rise by 15 per cent over the next five years, as the shortage of properties available to tenants intensifies.
Letting agents across the UK have reported new instruction numbers have fell for the 21st consecutive month in June, according to the Royal Institution of Chartered Surveyors (RICS).
RICS have said anecdotal evidence suggested the recent changes to buy-to-let tax were a determining factor, as they made some investors alter their future plans.
Geoff White, RICS policy manager, commented: “The situation in the private rented sector gives great cause for concern as supply continues to drop.
It would appear that the new policy on taxes and stamp duty have made it so difficult for landlords at a time when the UK needs more homes to rent, that many continue to exit the market.”
Over the past couple of years, the Government has made some significant tax changes that affect landlords, these include a 3 per cent stamp duty surcharge, a tapering of mortgage interest tax relief and an end to the ‘wear and tear’ allowance.
These changes were implemented to make buy-to-let less appealing to investors in order to help first-time buyers make their first step onto the property ladder by reducing competition for homes.
Unfortunately the reduction of properties available to rent has come at a time when supply of rental properties was already failing to meet demand. This is forcing rental values higher as tenants compete for a home.
The changes made by the Government have had an impact on first-time buyers, combined with schemes such as Help to Buy, first-time buyers are currently the only buying group on the increase, overtaking homemovers for the first time in 25 years.