Spareroom survey says Landlords will raise rents in 2016 to cover cost of the new legislation

by Property 118

16:25 PM, 30th December 2015
About 3 years ago

Spareroom survey says Landlords will raise rents in 2016 to cover cost of the new legislation

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Spareroom survey says Landlords will raise rents in 2016 to cover cost of the new legislation

With an uncertain year ahead for buy-to-let landlords, almost half (45%) are planning to raise their rents in 2016, and almost one in five (18%) are planning inflation-busting increases of more than 3%, according to a survey carried out by flatshare site, SpareRoom.co.uk.spareroom

The most common reason landlords cite (38%) for raising rents is the additional costs incurred by new government legislation, meaning future cuts to mortgage interest and wear and tear tax relief, stamp duty changes and costs of the 2016 Right to Rent roll out will be felt by tenants as well as landlords.

Other reasons for rent increases include rents rising locally (23%), expensive property repairs and maintenance (6%) and higher mortgage repayments (4%)

• 45% of UK landlords will be raising rents next year
• Almost one in five landlords (18%) plan to increase rent by more than 3%
• 38% cite new government legislation as their reason for raising rents

The table below shows what landlords plan to do with rents next year:

table

The reality is that average room rents may rise far higher than 3%, based on rental increases over the past year, and given the changes ahead for landlords. The average UK rent for a double room in shared accommodation rose by 8.6% in the past year to £593 per month – up from £546 the previous year – according to SpareRoom’s rental data. In London, the average room rent has increased annually by 6.3% to £721 per month, up from £678 a year ago.

Given that 49% of landlords increased their rents in 2015 and a further 20% increased them within the past two years3, this will be yet another blow for renters who are already stretched when it comes to affordability. Tenants will be hoping their landlord is one of the 55% who don’t plan to increase their rents next year or, if they’re lucky, one of the 3% reducing them.

Matt Hutchinson, director of SpareRoom.co.uk, comments: “The roll out of Right to Rent legislation, removal of mortgage interest tax relief and changes to the wear and tear tax break from 2017, on top of stamp duty changes coming in 2019, means buy to let looks like far more of a risk than it did at the start of the year.

“The worry is that tenants will bear the brunt of these changes. And if renters end up being the ones to shoulder the burden of legislative change, something has gone very very wrong. The private rental sector is already under immense pressure.”



Comments

Gareth Wilson

10:09 AM, 31st December 2015
About 3 years ago

Everybody needs to copy and paste the content of this article into a letter (suitably referenced to the Property118 page it came from at the bottom) and send it to their MP and the Treasury. This is a very important "I told you so" that they all need to see. It also needs to be sent to every member of the October Finance Bill committee, and every possible media outlet each member has access to.

Gary Dully

10:15 AM, 31st December 2015
About 3 years ago

The interesting figure is the 52% who won't be raising rents in 2016, perhaps spareroom.co.uk would do their users a better service if they warned their advertisers of the tax consequences of 'Clause 24', which is about to hit their professional landlord advertisers vs the actual owner occupiers that also use their service.

They normally send me a Christmas card, but I didn't get one this year, they must be busy doing surveys or something. Lol

Gareth Wilson

10:39 AM, 31st December 2015
About 3 years ago

Reply to the comment left by "Gary Dully" at "31/12/2015 - 10:15":

Yes I believe you've hit the nail on the head. The 52% are those without a clue as to what's coming down the tracks

Gareth Wilson

10:42 AM, 31st December 2015
About 3 years ago

Reply to the comment left by "Gareth Wilson" at "31/12/2015 - 10:09":

Everyone's local council leader and mayor should receive this too, with the quote from Matt Hutchinson highlighted in bold as well.

matchmade

11:34 AM, 31st December 2015
About 3 years ago

Reply to the comment left by "Gareth Wilson" at "31/12/2015 - 10:39":

Or they could be landlords who aren't affected by the changes because they have small or no mortgages, or they own their properties via a limited company.

Or they may have low incomes themselves, so they're not facing any increase in income tax.

Or they are spreading their rental income between several family members on basic-rate incomes, so none of them is taken into the higher-rate tax bracket.

Or they may have decided to absorb the increased tax rather than penalise their tenants, saving any rent increase until a tenant leaves and they have time to assess the impact of the changes on the local market. It's quite possible these landlords have assessed that most local tenants simply cannot afford to pay extra rent, in which case the landlord is going to have to take Clause 24 on the chin, or seek ways round it, such as the methods outlined above.

Barry Fitzpatrick

11:47 AM, 31st December 2015
About 3 years ago

Reply to the comment left by "Tony Atkins" at "31/12/2015 - 11:34":

Does the scope of those surveyed include/exclude people who take in lodgers? and pay no tax on the first £4,250 of income (rising to £7,500)

Gary Dully

13:40 PM, 31st December 2015
About 3 years ago

Reply to the comment left by "Tony Atkins" at "31/12/2015 - 11:34":

I don't have that many chins Tony.

My competitors on spareroom.co.uk will be watching each other a lot more closely I think.


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