Agents have warned that if the Government does not reverse its policy on how landlords are taxed in future, rents will go up and there will be a sell-off of rental properties.
The warnings have come separately from Belvoir and Knight Frank. The latter said that ahead of cuts to tax relief next April, in London “a small number of landlords have begun to explore a sale”.
Dorian Gonsalves, managing director of the Belvoir franchise chain, said that inflation is likely to rise sharply next year as a result of Brexit, outstripping wage growth.
He said that as a result, landlords will find themselves caught between an increased tax bill – and tenants unable to pay the higher rents needed to cover costs.
The currently stable rental market will go into reverse if the Government fails to act, he warned.
Gonsalves said that most Belvoir offices have been reporting rises in tenancy demand and slight increases in rent.
He also said that investor interest remains robust.
He said: “Investor enquiries were actually strong in quarter three, and in some areas the number of enquiries had increased. This is interesting as it shows that despite Brexit and Stamp Duty increases, landlords have not yet been frightened away from investing.”
He went on: “Because of the last government’s shift in policy away from home ownership ,and the lack of houses being built, there is now an urgent need for more housing for students, migrants, labourers who are moving to new areas for jobs, and professionals with families who require four- to five-bedroom accommodation and view renting as a better option.
“2015 and 2016 are the first years since the recession where wages have been increasing faster than inflation, a situation that is likely to continue until the end of the year.
“However, there is no doubt that Brexit will result in an increase in inflation next year, and when this happens, as it did during the recession, it will hit people’s pockets.
“Landlords in some areas are going to find themselves in a difficult position as they will be incurring tax increases, but will struggle to increase rents to cover this because we know that rental increases can only be in line with wages.
“This is something that we hope the Government will listen to, and take steps to address.
“If there is no reversal in government policy with regards to mortgage relief taxation, and no measures are introduced to increase the supply of rental properties, then landlords are likely to come under increasing pressure to raise rents.
“If they subsequently start selling off properties, this will clearly have a negative effect on the availability of good-quality accommodation. We await the Chancellor’s Autumn Statement on November 23 with great interest.”
In central London, landlords have had to contend with rents falling every month for the last year, said Knight Frank.
Average rents in October were 4.9% less than the same month a year ago.
The firm said this was a result of “markedly higher stock levels”, caused by uncertain vendors deciding to let their homes out rather than sell them.
Knight Frank said: “As rental values decline and ahead of cuts to tax relief next year, a small number of landlords have begun to explore a sale.”
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