Two questions occupy tenants more than any others:
- How easy will it be to find a new home to rent, should I need one? In other words, is the availability of rentals rising or falling?
- And what about rents? The same question arises here: are they rising? Or are they falling?
At the end of 2016, there was a little flurry of interest around the fact that rentals on new lets had dropped. What’s more, the fall in London was three times the average fall in the whole of the UK. But that was only a month-on-month change; the trend for the whole year was still up – though slightly below the rate of inflation.
To those questions, it would be possible to add another. Is government intervention in the rental market making life better and easier for tenants? Or more difficult? That question could be put in a slightly less polite form: does the government know what it’s doing?
The question arises because government intervention, while appearing to make important steps towards greater fairness (and there is no doubt that unscrupulous or negligent landlords will have a more difficult time in future), has done some things that make buy-to-let less attractive and thereby threatens to reduce the amount of rental property coming on to the market at the very time when a sea change is visible in British attitudes to long-term rental, with the result that the demand will be for more rental properties, and not less.
To be fair to the government, it was probably thinking more about the need to prevent another bout of unwise lending by banks, and we can all approve of anything that makes another financial crash less likely, but there can be no doubting the possibly negative impact on tenants.
There has been a great deal of talk about what Brexit may do to the rental market in 2017, but it seems quite likely that changes landlords face in tax reliefs and mortgage availability will be more significant than Brexit this year. The number of buy-to-let properties being bought is less by more than 50% than it was this time last year, which means that fewer new rental properties will be coming onto the market. PricewaterhouseCoopers estimates that the number of rented homes will increase over the next 10 years by approximately 50%. If we put those two figures together – fewer new rental properties together with a 50% increase in the demand for them – then one of two things is likely to happen:
- Rents, already likely to rise to cover the impact of tax changes on landlords, will increase to a level that will be extremely uncomfortable for tenants.
- The government will intervene with rent controls – and the inevitable result of rent controls is that:
A. The number of properties available for rent decreases even further.
B. Innovative practices that are often illegal and almost always unethical creep into the market.
Are we being too pessimistic? Well, perhaps we are. But the Royal Institute of Chartered Surveyors says that, nationwide, we are looking at a 1.8 million shortfall in properties available to rent.
What is certain is that both landlords and tenants will need expert guidance through the thorny thickets ahead. To discuss how 2017 is likely to affect you, call us. We have years of experience in this market, and we are always ready to put that experience at your disposal.