Rent rises and decrease in landlords on horizon for UK private rented sector

House sale stock 3The cost of privately renting a home in the UK is set to increase as landlords pull out of the sector in the coming year, surveyors have warned.

The August residential market survey conducted by the Royal Institution of Chartered Surveyors (RICS) has found that nearly two-thirds of surveyors expect that more landlords would exit the market than join it in light of policy changes such as a surcharge on second properties.

Over 60% felt landlords would exit the market over the coming year, while only 12% felt there would be a greater number of entrants. Moreover, for the next three years, 52% felt there would be a net reduction in landlords, with only 17% suggesting a rise.

As a result, private rent rises were likely to outpace house prices in the next five years, the RICS found.

In Scotland, the report found that surveyors expected house prices to increase in the next quarter but concerns were raised that less people were buying homes due to the Land and Buildings Transaction Tax (LBTT).

Hew Edgar, RICS Scotland policy manager, said: “A number of respondents to August’s Residential Market Survey indicated that the LBTT framework continues to dampen market activity in the middle house price bracket and above. Whilst transactions – which are a component part of activity – at this level are still going through, buyer enquiries and sales instructions are flat-lining, and this continues to be a concern of RICS professionals acting in this arena.

“The Scottish Government has proposed an LBTT Bill in this year’s Programme for Government, and in its current form it will provide a useful tidying up of current legislation surrounding the Additional Dwelling Supplement (ADS).

“However, prior to this Bill being tabled, the Scottish Government should fully assess the impact that the current tax bands are having on market fluidity across the price brackets. They may also wish to consider whether they can use the LBTT regime as an economic lever to optimise Scottish housing market activity through, for example, exploring the impact that exemptions for downsizers and those purchasing regenerated empty properties, of which there are 34,000 in Scotland, could have.”