UK faces huge rental home shortfall
By Will Leyland, 11 October 2016
As the new Brexit era of British economics approaches, there have been many encouraging signs in both the wider economy and property. Markets are soaring thanks to record lows in Sterling and property is basking in the reflected glory of foreign investment as a result of this.
Capital gains and yields have been rising steadily as investors from overseas seek value across the board with wealthy nationals from China and The Middle East especially keen to take advantage of the low exchange rates. Many stocks have been rising on the back of these performances and properties in the rental, buy-to-let, residential and commercial have been benefitting from price rises due to increased demand.
Sadly though, not every corner of the property market is benefitting from these upturns in fortunes and the rental sector has suffered a huge shortage in stock according to new figures. The Royal Institution of Chartered Surveyors (RICS) said that home ownership was increasingly unaffordable for many following years of price growth and 1.8 million more households would be looking to rent by 2025 as a result. It urged ministers to respond by removing their focus from home ownership to rebuilding the buy-to-let sector. The report claimed that stamp duty changes imposed by the previous Chancellor last April to discourage multi-home ownership had effectively killed off activity. It reported that 86% of landlords have no plans to increase their rental portfolio this year - adding that the trend was on course to remain like this for the next five years.
Certainly, the figures propose that confidence has been hit by the unpopular tax law changes introduced by George Osborne earlier in the year, but there have been indications from the government on a few occasions that much of the previous Chancellor’s economic policies may now be discarded.
As the Autumn Statement approaches, many are speculating that new chancellor Philip Hammond may look at ways to stimulate the buy-to-let sector in order to provide the population with the rental stock it will need.
Buy-to-let has been performing strongly so the moves would make sense for a chancellor who is looking to put his own stamp on government policy. Yields, tenancy rates, and capital gains have all remained strong, especially in the residential sector, and there are no signs of it being easier for first time buyers to enter the market. In addition, available housing stocks continue to dwindle, forcing prices upwards.
Another factor in strong residential property performance has been increasing levels of satisfaction with letting agents who are pushing up standards for both landlords and tenants. Efficient customer service, high quality dispute resolution, and general ease of service have been key factors in the rise of the agents who are now leading the market.
Previously announced action by the government has included plans to build 25,000 new homes a year using a £3bn Home Building Fund. The fund, made up of money already set aside for housing, will provide short-term loans to businesses in an effort to encourage new homebuilders into the market. The plans include spending a further £2bn on an accelerated construction scheme to make publicly owned “brownfield” land available for development and address the long-term housing shortage.
It is hoped that the new housing will be split fairly between affordable housing for first time buyers and buy-to-let properties for landlords in order to provide residential rental property for those unable to, or uninterested in, purchasing a house. Rental has increased in popularity not just through necessity but also due to popularity for a generation who now value freedom.
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