Corporate investors side-stepping tax set to move into rental sector

A leading market analysis suggests that the private rental sector may be set to benefit from large scale corporate investors seeking refuge in bricks and mortar.

Home, the property platform that includes a detailed monthly market analysis for both the lettings and sales sectors, says that with interest rates still being far below the rate of inflation, investors may look to the growing yields of buy to let for comfort. 

The latest Home snapshot says: “Given that rental yields are rising, we expect demand for UK property to remain high and perhaps rise into 2023 as investors (especially corporate investors who can sidestep Capital Gain Tax more effectively) seek the relatively safe returns afforded by bricks and mortar, facilitated by negative real interest rates.”

It also gives facts and figures behind the still-huge gap between supply and demand for private rental units.  

It says: “The number of properties available for rent is in decline overall (down 27 per cent over the last 12 months). This is due mainly to the steep decline in Greater London which is down by 51 per cent over the same period. The effect of this lettings drought on Greater London rents is plain to be seen with annualised hikes averaging 25.9 per cent, but much higher than that in the more central boroughs.”

Looking at the wider sales market, especially in the light of six successive base rate rises announced by the Bank of England, Home is playing down the impact and says a return to ‘market normality’ is underway in any case, and without any fear of a crash. 

It says sales stock is beginning to increase, albeit slowly and at different rates across different parts of the country.

Home plays down talk of a dramatic sales market slowdown, with any significant effect on prices, and says that compared even to a year ago, the market is still strong.

It states: “Every regional market is still outpacing their August 2021 performance. Furthermore, the data shows that unsold property is still typically spending considerably less time on the market than it was a year ago in every single English region, Scotland and Wales.”

And it goes on to say: “[Sales] Stock totals are returning to more ‘normal’ levels, but it will be some time before they actually do (between 400,000 and 500,000 properties). For this to occur, supply will have to increase rapidly and demand must fall significantly. Given the relatively small increase in mortgage costs (the latest 0.5 per cent rise by the Bank of England equates to around an additional £100 per month on an outstanding mortgage debt of £250,000), demand will not be significantly dented.”