The supply and demand issue that has plagued the ownership sector of the property market could become a reality in the rental market if the government’s pledge to levy a stamp duty tax specifically for investors comes to fruition.
From April 2016, the government will charge individual investors buying homes to let an additional three per cent on top of their stamp duty charges, which will mean adding up to £15,000 to the price of purchasing a home. There are worries that this will lower the supply of properties in the rental market, even at a time when demand continues to grow.
According to the Association of Residential Letting Agents (Arla), the coming five years will see the supply of rental homes decrease. In a survey of letting agents across the nation, Arla said that 40 per cent of respondents believe supply is set to decline, which is the highest reading seen at any point this year.
“This month’s findings are triggered by the Chancellor’s announcements around buy to let tax in his Autumn Statement. We said these changes would be catastrophic for the rental sector and this has been echoed by letting agents across the country,” said David Cox, Arla managing director.
“The new stamp duty increases will make owning a buy to let property unprofitable for a lot of landlords, and certainly make new investors think twice about purchasing a buy to let,” he added.
At the same time as Arla is predicting this fall, however, demand for rental properties increased marginally in November, with the report stating that in the month, the number of potential tenants looking to rent per property increased to 34 from 33 just one month before.
This was outpaced by a rise in the number of homes available, with the survey finding that in November, stock was a full nine per cent higher than it had been in October. showing just how landlords and investors are managing to serve the market and provide sufficient numbers at the present time.
With changes in the offing though, how will the market adapt? One potential solution will be for more people to purchase homes as part of larger projects, such as those with Experience Invest, where they can invest in single unit properties for prices that are significantly below market value, allowing them to potentially come in below the stamp duty threshold and avoid the new levy.
Other benefits that can be found with this sort of purpose built rental property include the fact they come with guaranteed returns for a set number of years, and the company deals with things like finding tenants, collecting rent, move ins and the maintenance and repair of the property.
The plus side of more people investing in property in this way is that it may mean that the problem with the supply forecast by Arla never really comes to fruition, with the market well catered for.