A decline of new buy-to-let landlords in the UK’s housing market means already high rents will continue to rise over the next five years, according to new analysis by estate agent Savills.
The leading property provider has forecast that average rent in the UK will rise from £1,122 to £1,320 by 2029, with private tenants in London set for an increase of over £200, from £1,680 to £1,919 by the end of the sitting Parliament.
Investors are reportedly being forced out of the market due to new regulations including Rachel Reeves’ decision to increase the stamp duty surcharge for second home owners from 3% to 5% in the autumn budget and the government’s Renters’ Reform Bill, which pledges to end no-fault evictions and restrict landlords to only raising rents once a year at the market rate.
The changes risk upping costs for tenants by between 5% and 10%, according to The Telegraph, which also reports that landlords have already sold 300,000 more properties than they purchased since 2016.
Labour has additionally demanded that owners meet energy targets of at least Band 3 by 2030, resulting in property upgrades that could chase landlords out of the sector altogether. Savills’ agent Guy Whittaker said the upgrades could, in some cases, “exceed an entire year’s rental income”.
He added: “In those cases, it may make more financial sense to sell.”
Emily Williams, director of research at Savills, also said the number of first-time buyers in the UK market was expected to stay below the pre-pandemic average in the next five years “due to a lack of any governmental support to replace Help to Buy”.
She added: “Increased regulation in the rental sector, combined with the newly-increased second home surcharge, will further dampen demand from both cash and mortgaged buy-to-let investors.”
While shorter supply and new regulations seem to be forcing landlords out of the housing market, a rise in demand is simultaneously pushing up prices.
Annual rental costs rose by 8.7% in the 12 months to October according to the Office of National Statistics (ONS), not far below a record high of 9.2% in March.
The Treasury has said the increase of duty for second-home buyers gives first-time buyers an advantage when looking to buy residential property. Ms Reeves also said the move would raise over £1.2 billion in tax before the 2029-30 financial year.
