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11:44 AM, 9th August 2023, About 9 months ago 16
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The UK’s private rented sector (PRS) has seen a significant decline in the number of homes to rent since 2016, one leading real estate advising firm reveals.
According to CBRE, it estimates that 400,000 rental properties have been sold in the past seven years, as landlords face increasing costs and higher mortgage rates.
According to the report, the main factors that have contributed to the reduction of rental homes are:
The firm also says that new EPC requirements and worries over the Renters (Reform) Bill are also leading to landlords leaving the PRS.
CBRE is also warning that if the Bank of England base rate rises to 5.75% by the end of 2023, more landlords will be put under pressure to sell.
The firm warns that if the trend continues, the UK will lose almost 10% of its private rented households by the end of 2023.
Scott Cabot, head of CBRE’s residential research, said: “Changes to policy in the past decade have increased the amount of tax payable on both purchasing a buy-to-let property and its rental income, and ultimately have reduced the viability of buy to let investment.
“More recently this has been compounded by high inflation which has driven a rapid rise in interest rates and increased other costs associated with owning and managing a property.”
Mr Cabot continued: “Higher mortgage costs could mean that buy to let borrowers may start to struggle to meet banks’ lending criteria.
“Interest coverage ratios stipulate that the rent from the property needs to cover 125% to 145% of the interest on the loan.
“As interest rates rise and mortgage rates increase, the rent needed to satisfy these conditions moves in tandem.”
CBRE points to industry data that shows tenants are spending 32%, on average, of their income on rent and there’s not enough build-to-rent (BTR) property entering the sector.
It says there has been £26.5bn of BTR investment since 2014 and it remains popular with investors.
But despite the investment, there will still be up to 150,000 fewer rental homes available – even when the current BTR pipeline is completed.
Sharief Ibrahim, CBRE‘s head of residential agency, said even with a booming BTR sector, the shortage of rental homes cannot be ignored.
He said: “Private landlords still play a vital role in the provision of rental stock and the current situation appears drastic.
“Many investors were relieved when the Labour Party reversed its plan to introduce rent controls should it win the next election, but we also see the need for bold solutions and policies to ensure the supply of rental homes in the UK doesn’t completely dry up.
“These solutions could include the reintroduction of mortgage interest relief, and/or either a temporary or permanent exemption of additional stamp duty for buy to let homes.”
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Binks
10:04 AM, 9th August 2023, About 9 months ago
“ The phasing out of mortgage interest relief, which reduced the tax benefits of owning a rental property” - well that could have been better worded. What tax benefits were there? I think the author meant to say to continue treating financing cost within PRS equally to any other business?
Yet again, to someone who doesn’t understand the issue, this sounds like there used to be some tax perks that were taken away.
Jeff L
10:05 AM, 9th August 2023, About 9 months ago
"UK’s rental market shrinks by 400,000"
No, that is NOT what was said; what was said was 400,000 rental properties had been sold.
That is totally different to the number of properties reducing by 400,000 ..... anything for a headline regardless of the accuracy or factual nature.
Alex Gillies
10:08 AM, 9th August 2023, About 9 months ago
With so many properties being sold and leaving the BTL market, what tends to be happening to these properties? Purchased into a Ltd and back on BTL market? Private purchase for an individual etc? I’d just be interested to know if there were any stats on this.
dismayed landlord
10:27 AM, 9th August 2023, About 9 months ago
Its a small sample but I sold 14 in the last 3.5 years and ony 2 were sold to BTL. Thats in North West Kent. I have one more under offer and that is going to a private 1st time buyer. Hopefully!
Seething Landlord
12:09 PM, 9th August 2023, About 9 months ago
Lies, damn lies and statistics. According to HMRC the number of properties in the PRS has increased, anecdotally some landlords are selling up whilst others are investing and there are new landlords entering the market.
The one thing that is clear is that demand exceeds supply and is unlikely to be satisfied whilst the tax regime and high interest rates combine to squeeze the traditional leveraged BTL model out of existence.
The Forever Tenant
14:30 PM, 9th August 2023, About 9 months ago
One of the big issues is that it's really difficult to know for certain how many rental properties there actually are out there.
Anecdotal statements are one thing, but the plural of anecdote is not data.
The one piece of information that actually seems to have hard data is from the deposit protection companies who have stated that the amount of properties for which they hold deposits has risen. This could be because more landlords are taking deposits where they were not before (which seems unlikely) but there are other potential explanations.
The commenter above states that the HMRC have said that property numbers are increasing. I don't know much about self assessment but when declaring income do you have to state where that income has come from and if so, how much detail is needed to be given? It could be they are getting their information from there.
Monty Bodkin
16:35 PM, 9th August 2023, About 9 months ago
Reply to the comment left by Seething Landlord at 09/08/2023 - 12:09
https://www.uhy-uk.com/insights/rental-market-loses-116000-buy-let-properties-last-year-contributing-rising-rents
The UK residential market has lost 116,000 buy-to-let properties in the last year, with the number of rental homes dropping from 4,579,000 to 4,463,000*.
* Number of properties listed by buy-to-let landlords on their tax returns. Source: HMRC
Bernard Mealing
17:02 PM, 9th August 2023, About 9 months ago
Instead of talking about Income and various other things. Let's instead use this article to highlight to our MP. about the shrinking number of BTL's. but even if the well off of our society build they are not going to let people with history of rent arrears into them. But some of us more interested in helping will. I had 13. now I have 9. and looking at my rental model. NO. People who have been kicked out for rent arrears etc etc
Jeff L
17:08 PM, 9th August 2023, About 9 months ago
Reply to the comment left by Bernard Mealing at 09/08/2023 - 17:02
Except this article does not show the number of BTLs is shrinking; it just shows that 400,000 BTLs have been sold over the last 7 years.
How many, over that 7 year period, have been added? When we know that, then we can say whether the net number of BTLs has increased or declined.
Seething Landlord
18:43 PM, 9th August 2023, About 9 months ago
Reply to the comment left by Monty Bodkin at 09/08/2023 - 16:35
Thanks Monty, those are probably the figures that I misremembered. What they don't reveal is how many of the 70000 landlords assumed to have given up actually incorporated and how many of the 110000 properties were bought by incorporated landlords. I believe that the question about the number of properties on the self assessment form is optional so if bought by individuals who choose not to answer the question, that would also disrupt the statistics. Whatever, it hardly points to a mass exodus from the sector.