UK rental costs set to rise in 2016

UK rental costs set to rise in 2016

With demand for property across the nation continuing to outpace supply, letting agents believe that rental costs will increase throughout the year.

Summary:

  • Some 52% of letting agents in the UK believe rental costs will increase during 2016
  • Demand for rental properties grew to almost 40 per letting agent branch in February
  • Many amateur landlords are expected to dampen buy-to-let activity after April, placing upward pressure on rental costs

Over half of UK letting agents believe rental costs will increase from April.

Letting agents think that the new buy-to-let stamp duty surcharge, beginning on April 1st will push up rental costs, new research has found.

It could also trigger a decline in the supply of available properties coming onto the rental market, according to the report from the Association of Residential Letting Agents (ARLA).

David Cox, ARLA Managing Director, said: “The demand for housing continues to intensify as supply remains an issue across most of the country. This will most certainly cause rents to increase, with supply dropping, as competition for the limited availability of properties intensifies.”

In February demand for rental properties grew to an average 37 per letting agent branch, the highest since February 2015, as supply increased marginally.

Some 52% of letting agents reported an uplift in interest from buyers looking to invest in property before the stamp duty reforms come into effect, up from 47% in January.

However, after April 1st deadline some 63% predict that supply will fall as landlords exit the market.

Some 57% of ARLA members agree rents will rise once the stamp duty reforms have come in to effect, as increased costs for remaining landlords are passed through to tenants.

Following on from the announcement of stamp duty reforms, the need for a private rented sector evolution was highlighted with the emergence of build-to-rent. Knight Frank estimate that £50 billion worth of investment in the sector will see build-to-rent account for 5% of the rental sector by 2020.

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