December 22nd, 2015
The cost of renting a home in the UK could increase at a faster rate than the cost of buying, according to recent research from the Royal Institute of Chartered Surveyors (RICS).
Simon Rubinsohn, RICS chief economist, blames the recent moves to discourage investment in Buy to Let property for the very real prospect of renters being priced out of the market.
“Critically our principal concern with the measures announced by the government is that they are overly focused on promoting home ownership, at the expense of other tenures” said Mr Rubinsohn. “Discouraging buy-to-let could see private rents take even more of the strain.”
According to RICS estimates, house prices will increase by 6% in 2016, with rents to rise by 3%. Over a five year window, however, they estimate a swing which would cost the nation’s renters dearly.
“With recent changes aimed at stopping Buy to Let investment, critics have had something of a field-day with worries over rental increases” says Simon Butler, Associate Director at Contractor Mortgages Made Easy. “It now appears that there is some substance to these fears, with an estimated 5% increase in rents over five years, compared to house prices increasing by 4.7%.”
“This could spell disaster for many who are unable, or who have until now resisted, becoming homeowners.”
Chancellor George Osborne announced recently a series of changes to taxation of investment property, designed to ‘promote home ownership’, by introducing tax changes to make life harder for landlords.
From 2017 they were already restricted in the tax relief they could claim on rental income, however from April 2016 a new 3% Stamp Duty surcharge is to be levied on all second and investment property purchases.
In real terms, this means an average of £5,000 in extra tax for landlords investing in property, compared to those buying to live in one.
“In the long run, there is a concern that rents could rise rapidly given there will still be some people unable to make the leap to the property ladder” adds Butler.
“The good news, however, is that there has never been a better time for contractors looking to make the jump, with government schemes such as Help to Buy – including the new Help to Buy ISA – being available.”
“It is, however, clear that a delay could be very expensive, as house prices are sparked into life by those who would otherwise not have looked to buy. By assessing your mortgage options with a broker sooner rather than later, you will be in pole position when the right property appears.”
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