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Home Money Rents will rise due to labor pressure on landlords, real estate experts report

Rents will rise due to labor pressure on landlords, real estate experts report

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Gap: the chasm between the supply of properties available for rent and growing public demand from tenants continues to widen, according to Rics members

Renters will compete for fewer homes and pay increasingly higher prices thanks to Labour’s attack on landlords, according to a closely watched survey of property experts.

The latest survey by the Royal Institution of Chartered Surveyors reported that the number of available rental properties was declining while demand from tenants was increasing.

One said rents “must rise” as a result of the stamp duty increase for landlords announced in the October Budget, while another said “the cult of buy-to-let is dead”.

Some of the agents surveyed gave their opinion before the Budget on October 30, so the readings could be more discouraging in the future.

In the Budget, homeowners saw more unwanted changes, including an increase in stamp duty on the purchase of rental homes and second homes.

These buyers were already facing a 3 per cent surcharge on top of what those buying a property to live in currently pay.

However, from October 30 that figure rose to 5 per cent, adding thousands of pounds to the cost of buying rental homes and second homes.

Gap: the chasm between the supply of properties available for rent and growing public demand from tenants continues to widen, according to Rics members

Rachel Reeves says this will free up around 130,000 homes, as more homes will now be bought by owner-occupiers, rather than landlords.

However, while that may be good news for aspiring homeowners, it also means fewer homes in the private rented sector.

Many Rics members criticized Labour’s budget for making tenants’ situation worse, not better.

Andrew Oulsnam, of Oulsnam letting agents in Birmingham, said: ‘Problems in the rental market persist, with too many tenants not seeking enough properties.

“The budget will make things worse and, as a result, rents will have to go up.”

Neil Foster of Hadrian Property Partners in Hexham added: ‘The rental stock continues to decline, putting further upward pressure on rental levels.

“It is a mystery where the inhabitants of Westminster’s Ivory Tower expect most of the private tenants to live.”

Daniel Wiltshire, actuary and independent financial adviser at Wiltshire Wealth, says a number of his buy-to-let clients have decided that property investment is no longer for them.

“The buy-to-let cult is dead,” Wiltshire said. ‘I have had several meetings with potential property investors who have decided to pull out and look at stocks and shares instead.

“The national psyche is programmed to invest money in bricks and mortar, but the recent increase in stamp duty, along with other incremental tax increases over the last 10 years, has made even the most die-hard property enthusiasts question the wisdom of putting all your eggs in one, highly taxed basket.’

Rents expected to rise: chart shows how Rics members' forecasts have changed

Rents expected to rise: chart shows how Rics members’ forecasts have changed

Fall in homeowners buying new properties

Problems for renters persist as rental properties continue to disappear from the market and many potential investors no longer want to buy new properties.

Across the UK, Rics members reported fewer homeowners looking for new properties, but in the North West and the Midlands this was particularly prevalent.

Will Ravenhill, of Readings Property Group in Leicester, added: “Many more landlords are looking to sell because they are fed up with successive attacks by governments on the private rental sector.”

The Labor Government is introducing a tenants’ rights bill to end Section 21 “no-fault” evictions, which will become law in summer 2025.

John Chappell, a member of Rics based in Skegness, Lincolnshire, said: “The market remains very unstable due to growing concerns about the extension of tenants’ rights.”

“Increased costs and administration will mean that there will be less accommodation available to rent.”

1731830143 77 Rents will rise due to labor pressure on landlords real
1731830143 228 Rents will rise due to labor pressure on landlords real

Fewer homeowners coming to market – charts show the net balance is negative, meaning more Rics members are seeing fewer instructions from new homeowners in their local areas.

What will happen to rents?

More Rics members, including estate agents and surveyors, said they had seen an increase in tenant demand between August and October than those who said demand had decreased.

During that same time, they also said the number of new rental homes coming to the market dropped.

Most agents and surveyors expect rental prices to increase in the coming months and years, due to this mismatch between supply and demand.

Across all UK regions, more Rics members said rents would rise in the next three months than those who said rents would fall. This was most overwhelmingly the case in Wales, the Midlands and Yorkshire and the Humber.

Colin Townsend, of John Goodwin estate agents in Malvern, Worcestershire, said: ‘Rents continue to rise. This trend is likely to continue as there was very little stimulus in the budget to persuade landlords to invest in the rental market.’

Daryl Woodward, of Peninsula Estates in Wirral, near Liverpool, said there was “fewer instructions, as landlords leave the market, rents rise and tenant demand rises, with fewer properties to let”.

Over the last four years, the average rent for a property in the UK has increased by 34 per cent, according to Zoopla. Some cities have seen steeper rent increases of more than 40 percent.

Over the next five years, Rics members expect rents to rise by around 5 per cent each year on average.

How to find a new mortgage

Borrowers who need a mortgage because their current fixed-rate agreement is ending or because they are buying a home should explore their options as soon as possible.

Quick mortgage search links with This is Money partner L&C

> Mortgage rate calculator

> Find the right mortgage for you

What happens if I need to remortgage?

Borrowers should compare rates, talk to a mortgage broker and be prepared to take action.

Homeowners can close a new deal six to nine months in advance, often with no obligation to accept it.

Most mortgage agreements allow fees to be added to the loan and are only charged when requested. This means borrowers can get a rate without paying expensive processing fees.

Please note that by doing this and not paying off the fee upon completion, interest will be paid on the fee amount for the entire term of the loan, so this may not be the best option for everyone.

What happens if I am buying a house?

Those with agreed-upon home purchases should also try to lock in rates as early as possible, so they know exactly what their monthly payments will be.

Buyers should avoid overreaching and be aware that home prices may fall as higher mortgage rates limit people’s borrowing capacity and purchasing power.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with free broker L&C, to provide you with free, expert mortgage advice.

Interested in seeing today’s best mortgage rates? Wear This is the best mortgage rate calculator from Money and L&C to show offers that match your home value, mortgage size, term, and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s Online Mortgage Finder? It will search thousands of offers from over 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C

However, please note that rates can change quickly, so if you need a mortgage or want to compare rates, speak to L&C as soon as possible so they can help you find the right mortgage for you.

Mortgage service provided by London & Country Mortgages (L&C), which is authorized and regulated by the Financial Conduct Authority (registration number: 143002). The FCA does not regulate most buy-to-let mortgages. Your home or property can be repossessed if you don’t keep up with your mortgage payments.

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