Rents Could Rise By 15% as Rental Supply Dries Up

In research by the Royal Institution of Chartered Surveyors (RICS), they found that rents could rise by 15% as quickly as 2023 due to the shortage in rental properties.

Their survey detailed how small-scale landlords are leaving the market due to changes made to buy-to-let investment regulation.

RICS went on to detail how its members have seen rental property supply fall consistently for nearly two years, although demand for rental properties is still increasing. This is particularly noticeable in Birmingham, where rental supply is struggling to meet the demand that has exploded over the last few years.

Changes to the buy-to-let market that were started last year have meant that mortgage tax relief for landlords will be heavily restricted by 2020, severely dampening many small-scale landlord’s ambitions. Abdul Choudhury, RICS Policy Manager, described how the full impact is yet to be felt:

“Withdrawing tax breaks that small landlords relied on, placing an extra 3% on second home stamp duty, and failing to stimulate the corporate build-to-rent market, has understandably had an impact on supply.

“Ultimately, the government must consider the impact of its policies, and if the wish is to move away from the private rented sector, it must provide a suitable alternative.”

According to the survey, the South West of England will see some of the highest growth in rents, particularly in regions such as Exeter.  Similarly, areas such as Edinburgh, Birmingham and the Commuter Belt are experiencing ‘mini-booms’.

Although for tenants rents could rise by 15%, this lack of stock is driving core growth in these areas, combining with increased regeneration to create a more desirable destination. For investors and any UK property investment company, the market is currently in a healthy position in terms of rising rental yields and strong capital growth, despite the lack of stock.