Stable rents show that buy to let is still sound, says leading agent

Latest official figures show that private rental prices paid by tenants in the UK rose by 1.0 per cent in the 12 months to the end of January, unchanged from December 2018.

In England, private rental prices grew by 1.1 per cent while Wales experienced growth of 0.9 per cent and in Scotland private rental prices increased by 0.7 per cent.

London’s rents rose by 0.1 per cent in the 12 months to January, down from 0.2 per cent in December.

The data comes from the Index of Private Housing Rental Prices, which uses information from the Valuation Office Agency and national governments in Scotland, Wales and Northern Ireland. 

Marc von Grundherr, director of London lettings agency Benham & Reeves, says the figures suggest that despite the fiscal and legislative war waged on buy to let landlords by the government, the sector remains a lucrative investment with yields in many areas of the UK holding firm.

“Of course, changes to stamp duty and tax thresholds have had a notable impact and as the government look to rob Peter to provide a house for Paul, an inadequate level of suitable rental stock will ensure rental growth remains buoyant as demand exceeds supply” he says.

“Come June, we may see a further unsettling of the sector with the introduction of a ban on lettings fees and it will be interesting to see how the dynamic shifts between tenant, landlord and agent and whether this has an immediate impact on the cost of owning or renting a buy to let property.”

Less optimistic is Kate Davies, executive director of the Intermediary Mortgage Lenders Association, who says the absence of growing investment returns in the buy to let sector is now forcing a choice on landlords.

“As buy to let borrowers start to feel the effects of income tax changes reflected in their most recent tax bills, the pressure to increase rental prices is likely to mount” says Davies.

“We predict this tax burden on landlords will be a main reason for a lacklustre buy to let sector this year and next. Gross buy to let lending will likely fall six per cent to £36 billion in 2019 and £35 billion in 2020, with landlords purchasing 59,000 rental properties in the coming year, down from 66,000 in 2018.

“With landlords set to feel the pain of increased costs and legislation for several more years, the government must act to ensure that no additional measures risk further eroding the health of the Private Rental Sector are introduced, and that the number of available rental properties does not decrease still further” she concludes.