Member Article

Rents feel short-term chill of tax changes

Rents have reversed their spring trajectory as a tide of homes to let bought before the Stamp Duty Surcharge have reached the private rented sector, according to the latest Buy-to-Let Index from letting agents Your Move and Reeds Rains.

Average rents for homes to let across England & Wales now stand at £792 per month, as of May 2016.

This represents a drop of -0.2% since April, and compares to a long-term average monthly rise of +0.4% over every May since the recession.

On an annual basis, rents are now 1.8% higher than in May 2015 – or half the annual rate of rental growth seen at the start of 2016, when in January this stood previously at 3.6%.

Adrian Gill, director of lettings agents Your Move and Reeds Rains, comments: “This is the equivalent of a flash flood for the rental market.

“Just a month ago rents were heating up and spring was in the air – but this has been put on hold as a tide of new properties to let has disrupted the normal dynamics of supply and demand. Landlords escaping a much larger stamp duty bill by completing their purchases before 1st April have now finished their repairs and paperwork, with these homes to let competing for tenants in May and into June. That short-term mismatch has made May an exceptional month, with excellent deals available for some prospective tenants.

“But all tides go out again – and this is definitely no exception. Overall the tax changes to the buy-to-let industry will discourage some property investors, and most of the properties that became available to let in May will have been planned purchases brought forward from later in the year. The net effect will not be more properties to let – quite the opposite. If new regulations and taxes produce a drought of homes to let, then the overall shortage of housing in the UK will only bite harder for tenants. Meanwhile, this heightened shortage and possibly higher rents as a result could also protect landlords somewhat from the financial effects of more punitive rules and regulations.”

Click here to read the full Your Move Buy to Let report.

This was posted in Bdaily's Members' News section by Property Editor .