The recent report from RICS has predicted that rents are set to rise by a further 4% in the next 12 months. This comes as no surprise due to the high level of interest on mortgages, making it virtually impossible for first-time buyers to get on the housing ladder, resulting in the masses turningto the rental market.
However, this comes at a time when the market is witnessing an exodus of landlords, resulting in a lack of stock which is pushing up the prices. Property market expert and Group Chairman of Cornerstone Tax, David Hannah, explains why landlords are leaving the market in droves.
The rental market has become less profitable for buy-to-let landlords due to increasing scrutiny and government red tape at a time when their properties are needed to suppress the growing demand for housing.
As well as soaring mortgage prices landlords are now faced with the government’s costly new EPC targets, which will force landlords to upgrade the energy efficiency of their buy-to-let properties to a rating of ‘C’ in 5 years, which is set to come at a considerable cost or face fines of up to £30,000.
The long-debated Renters Reform Bill is also still being considered by the government, which contains radical plans for the housing industry. However, some feel that landlords are being targeted at a time when they are crucial in providing homes. Group Chairman of Cornerstone Tax, David Hannah, notes that it is important to balance tenant rights and tenant obligations and ensure that landlords keep some of their authority.
This comes as a landmark study from Cornerstone Tax reveals the pressure that landlords are feeling due to the current rental market as nearly 1 in 4 (24%) say their biggest mental health strain is managing their tenants.
David Hannah, Group Chairman at Cornerstone Tax, discusses the current landscape of the renting market said, “Rent prices are going up because landlords’ costs, particularly as a result of rising interest rates, are increasing.
“However, this is not the whole picture as there is still a chronic undersupply of housing in the UK in the popular locations. For example, rent rises in London post pandemic have been as much driven by a lack of available properties as they have been by inflationary pressure.
“The situation has been particularly exacerbated for houses in multiple occupation (HMO) – these are landlords who typically include the costs of energy, heating, and other bills into the rent. The soaring increase in energy costs has as a result had to be factored into the rent for these types of properties. Accordingly, rent rises in these types of lets exceed inflation by a considerable margin.
“In terms of the rental reforms being considered, I am in favour of rogue landlords being driven out of the markets, but there are also good landlords who have bad tenants that need to be considered.
“The most important thing is to balance tenant rights against tenant obligations and ensure that landlords keep some of their authority.
“There are cases in which properties have been damaged and tenants refuse to let their landlord inspect the home, or where rent has not been paid for a considerable period of time, for example. I welcome the proposed changes of the renting rules, and agree tenants need protection, but landlords ultimately need rights too. Our study shows that landlords do need help alongside tenants as nearly 1 in 4 say their biggest mental health strain is managing their tenants.
“I think the rental market is filled with uncertainties at the moment, with rising rents making it less attractive from a renter’s standpoint and rising house prices making it less desirable for buy-to-let landlords to grow their portfolios.
“Our research shows that many landlords were not prepared to deal with the current obstacles facing the rental market as 1 in 5 say they became landlords without the sufficient knowledge needed and have lost thousands as a result.”
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