UK rents are expected to rise by 15 per cent in the next five years due to a lack of supply, the Royal Institution of Chartered Surveyors’ (RICS) has warned.
The group said its July survey showed a continued reduction in new property being put on the market in the lettings sector, with 22 per cent more respondents reporting a fall, marking the eighth consecutive quarter of decline.
This lack of available properties means rents are estimated to go up by almost 2 per cent across the UK this year, but RICS said “the shortfall in the supply pipeline is more visible over the medium term”, with rents predicted to rise 15 per cent by the middle of 2023.
East Anglia and the South West are viewed as likely to see the sharpest growth over the period, RICS warned.
The organisation said the lack of supply, which is “evident in virtually all parts of the country” was “symptomatic of the shift in the mood music in the buy-to-let market in the wake of tax changes which are still in the process of being implemented”. Tax relief for buy-to-let investors has been reduced, while stamp duty on second homes has increased in recent years.
Simon Rubinsohn, RICS chief economist, said: “The impact of recent and ongoing tax changes is clearly having a material impact on the Buy to Let sector as intended. The risk, as we have highlighted previously, is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the Build to Rent programme or government funded social housing.
“At the present time, there is little evidence that either is likely to make up the shortfall. This augers ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure.
Abdul Choudhury, RICS London policy officer, said the survey showed the government must “urgently” look at the private rented sector and find ways to “encourage good landlords”.
He said: “Ultimately, Government must consider the impact of its policies, and if the wish is to move away from PRS, it must provide a suitable alternative. If they wish to improve PRS, as we have suggested by professionalising through regulation and the PRS code, there is justification to reconsider the approach taken to tax.”
Research from think tank Centre for London released earlier this week showed the lack of affordable housing in the capital was a major factor causing people to leave the city.
In its report, the group said: “The continuing affordability crisis and the prospect of Brexit are dampening the city’s appeal, with the former seen as driving the rise in the number of people in their mid-twenties to thirties leaving the capital.”
