Now that a couple of months have passed since the government’s new 3% tax levy was imposed on buy-to-let properties, a report has revealed worrying figures about potential rent increases in the near future.
The new tax levy is part of the George Osbourne’s five point plan for tackling Britain’s housing supply issue. Basically, any property purchased after 1st April 2016, costing more than £40,000 will be taxed an extra 3% if it is being purchased by a buy-to-let landlord in a scenario where the property is not going to be the main place of residence.
And so with this having come into effect in April of this year, a new survey has revealed than many landlords are now likely to raise the rent they charge their tenants.
The survey, published by the Residential Landlords Association, found that 84% of private sector landlords said they are likely to consider increasing rents due to the new tax charge imposed on the buy-to-let sector.
It also found that 78% of landlords said the changes have put them off investing in any more buy-to-let properties, which could in the long term cause real issues in terms of housing supply that’s needed to meet the increasing demand.
Housing demand is projected to further increase, as we reported before and first time buyers are facing more and more hurdles between them and the prospect of owning their own home – with a report indicating first time buyers could need a deposit of £46,000 by 2020.
This could mean that as more are priced out of the market in terms of owning their own home, they could also face issues with finding a suitable, affordable property to rent.
As prices could rocket due to the combination of landlords raising rent to compensate for new taxes imposed, and the subsequent lack of available rentable properties due to landlords across the country being less likely to continue investing and bringing more rentable properties onto the rental market.
In light of the news of rising rent costs, The Guardian recently published an article posing the question – should we follow in the footsteps of other countries, which impose caps on rent? It means that prices can only reach a certain point and it prevents landlords imposing any massive rent spikes.
When it comes to investing, more and more people who can afford to, are looking towards buy-to-let investments. With savings interest rates still woefully low, and stock market volatility, investing in rental properties has never looked more lucrative, as we have shown in this previous blog post about areas with excellent rental returns in and around Glasgow.