Fewer investors using buy-to-let mortgages in the market will see rental rates rise due to further supply and demand imbalance, new report finds.
- Falling interest from property investors that use buy-to-let mortgages will fuel rent growth in the face of sustained demand and diminishing supply in the UK PRS
- The Intermediary Mortgage Lenders Association believe July’s buy-to-let tax relief reforms will see many investors that are reliant on the freedoms to generate returns leave the market
- PRS products underpinned by key investment fundamentals are currently generating significant interest from institutions and cash-rich investors
Is the UK’s rent growth curve about to accelerate in the face of changes made by the Government in the Summer Budget?
Discouraging investment from landlords that previously relied heavily on the buy-to-let mortgage tax relief freedom will ultimately increase rental rates, a new report from the Intermediary Mortgage Lenders Association (IMLA) has found.
In July George Osborne’s decision to cut the tax relief on rented property from 40% or 45% to basic rate raised concerns for many investors. For those that relied heavily on the tax relief to make returns on their investment, they now faced the threat of seeing their profits slashed.
‘Segmenting the UK Mortgage Market’ highlights that these changes will push many investors into losses, and ultimately reduce the number of new investments made. Crucially, however, the report believes that constraining demand in the private rented sector (PRS) at a time of huge demand from a growing population will ultimately drive rental rates in the market.
By 2025 over 50% of 20-39 year olds in the UK will be renting in the PRS. Whilst the idea of owning property proves too expensive for many tenants, many today actively choose to rent to fulfil a more transient lifestyle, with fewer people associating home ownership with success.
It’s these trends that make UK property in the PRS a highly sought after asset from investors from around the world. Ensuring that key investment fundamentals such as location are taking into consideration before any purchase, cash-rich investors and institutions continue to be enamoured by the sectors proven track record of growing returns.