Buy-to-let squeeze driving rent increases for tenants, says Rics

TENANTS face higher rents because extra taxes and restrictions on landlords are pushing the property owners to sell up, reducing the supply of properties to rent, surveyors have warned.

Buy-to-let investors face an extra 3pc stamp duty charge, meaning fewer are entering the market or buying additional properties, according to the Royal Institution of Chartered Surveyors.

Landlords can no longer claim mortgage interest costs against their rental income for tax purposes, pushing some small investors to sell up, again taking properties out of the rental market.

The proportion of lettings agents reporting falling instructions outweighed those who said they were getting more properties to rent by a margin of 22pc – the weakest outlook in the survey’s near-20 year history.

Rics estimates the result will be a rise in rents of around 2pc this year and 15pc by 2023. “The impact of recent and ongoing tax changes is clearly having a material impact on the buy-to-let sector as intended,” said Simon Rubinsohn, chief economist at Rics.

“The risk is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the Build to Rent programme or government funded social housing.

“At the present time, there is little evidence that either is likely to make up the shortfall.

“This augurs ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure,” added Mr Rubinsohn. Renters, buyers and landlords are also likely to feel additional pressure on their finances thanks to the recent interest rate rise from the Bank of England.

While the hike leaves the base rate at 0.75pc – low by historic standards – it is still likely to make borrowing more costly at a time of tight margins for landlords, and prospective buyers.

It was therefore “no surprise” that speculation surrounding the August rate rise meant newly agreed sales remained flat in the past four months, Rics said.

This may well have been due to potential purchasers holding off, in order to await the decision.

Overall, sales data was consistent with a “broadly stable housing market” Rics said.

This stability was at national level, however, as there was variation from region to region.

London’s and the South East’s property market was less robust than the Midlands, Scotland and Wales.