The market is witnessing a significant shift as a number of landlords exit due to increasing legislative pressures, tax liabilities and the removal of mortgage relief, says Antony Lark, joint CEO of estate agency and lettings group Spicerhaart.
Rents have begun to stabilise, despite the exodus of landlords from the sector and resistance over rent reductions, says Lark.
He explained: “We’re noticing that the level of landlords leaving is higher than anticipated – particularly among those who’ve retired, who need the money to meet rising living costs, or are helping children buy first homes, or who’ve concerns over inheritance tax.
“This exodus is paving the way for Build to Rent investors and younger landlords under 40, who now constitute a much larger proportion of the landlord demographic than in the previous decade.
“The new landlords entering the market are more likely to buy in higher-yield areas further north, such as Stoke-on-Trent and Crewe, where yields can be as high as 9% on a smaller investment, spreading risk over a larger portfolio.”
Lark added: “You might think that rents would continue to rise, having seen a 6.6% increase in the last year, compared to 10% a year ago.
“Instead, despite significant demand for rental property, we’re seeing this start to plateau as tenants have now reached a critical point in terms of what they’ll pay.”
According to Lark, in some parts of the country, landlords are even having to reduce prices to ensure their properties are let.
“However, many landlords are resisting these lower offers, especially those who’ve had to remortgage or have increased costs,” he said.
A positive outcome, Lark noted, is that there has been a reduction in rogue landlords and those unwilling to comply with heightened licensing and regulatory requirements. This trend is contributing to a more professional and reliable rental market.
He added that the new Labour government’s approach to the rental market is a topic of significant interest and importance.
“The emphasis on protecting tenant safety through rigorous regulatory measures and licensing is broadly welcomed by professional agents. However, there is a critical need for policies that also incentivise investment in the property market,” Lark said.
“We support the Labour government’s regularity measures protecting tenants’ safety. Licensing will help with this,” he added.
“But the biggest impact would come from reviewing the reversal of mortgage tax relief for buy-to-let (BTL) properties. Such a monetary policy change would inject much-needed growth into the market.”
Lark said he would also like to see clarity around tax liability changes, removal of the second home stamp duty tax to encourage investment in rental properties, tax breaks for landlords who’ve been pushed into higher tax brackets due to rental income, and assurance over rent caps.
“The Labour government has a golden opportunity to resolve issues within the rental market and remove uncertainty surrounding the potential impact of the Renters’ Rights Bill,” he said.
“Clear, consistent regulation will allow landlords to plan and manage their portfolios more effectively, ensuring a decent supply of rental properties in the market, which will restore stability to the market once more.”