Expansion of the UK’s private rental sector has slowed in recent years and a new report places the reason for that firmly at the feet of the Government. From a range of new rules and tax changes to Brexit uncertainty, UK Government action has weakened confidence among buy-to-let investors and encouraged much more caution with regards to investing in the sector.
While the new report from Kent Reliance shows that the number of homes available to rent in the PRS has grown from a year earlier, it confirms that pace of growth has slowed. Coming hot on the heels of the BVA BDRC report showing that BTL landlords are more likely to sell a property than buy one, it’s yet another clear sign that the Government needs to carefully consider its treatment of the PRS. After all, it currently provides 19.1% of all housing in the UK – that’s a hole that would be very difficult for any Government to fill.
Kent Reliance report findings
According to the latest Buy to Let Britain report from Kent Reliance, the UK’s PRS sector grew by just 0.2% in 2018, with around just 11,000 new PRS homes added by investors in the past 12 months.
That’s a much lower growth rate than in 2012 when the number of BTL homes available to rent rose by 5% or 240,000 per year. It’s even weaker than the 3.3% rate of growth in 2015, when around 170,000 new PRS homes were added to the sector.
That’s not the only detail highlighting the slowdown in the PRS. The report also shows that confidence among PRS investors and BTL landlords has fallen to the second lowest level in the survey’s history. That’s something that is weighing on investment intentions and landlord’s interest in expanding their portfolios.
“Against a backdrop of political uncertainty that’s driving economic uncertainty, government policy continues to distort the current housing market,” said Andy Golding Chief Executive Officer, OneSavings Bank, the parent company of Kent Reliance.
“Government policy has affected investors, particularly amateur landlords. Changes to mortgage interest tax relief and the stamp duty surcharge have pushed up costs, while tighter underwriting rules have made it more difficult for those seeking to expand their portfolio or indeed purchase their first buy to let property,” Golding added.
However, while the effects of Government intervention and broader political uncertainty are broadly seen as a negative for many existing and potential BTL landlords, it’s not all bad news.
Higher rents boost BLT yields
For existing and potential PRS landlords, the returns available on BTL investments are beginning to improve. Average rents are rising and with property prices broadly stagnating, the yields available on some BTL properties is on the increase.
For example, the report states that average rental yields across London have risen to 4.5%, the highest since 2015.
Another detail to consider is that even though the level of demand from tenants has slowed, that’s largely down to increased activity from first-time buyers making use of the Help-to-Buy scheme – which is set to end in 2023. That suggests that tenant demand growth will move into positive territory again sometime soon.
There are also other options for PRS landlords to help safeguard their investment and even expand their portfolio. One of them is request rent guarantors from tenants to ensure the rent will be paid. Services like ours at Rent Guarantor can help make the process quick and painless while giving you that all-important peace of mind.
Another way to help make your BTL investment less costly, is to create a limited company. This can work well for portfolio landlords who own numerous properties, as it has tax advantages over buying and managing your BTL properties in a more personal way.
This latest report highlights what many existing BTL landlords already know; good levels of return on your investment are still available in the PRS, if you can make a few changes to streamline your investment management structure and use all relevant, available means to safeguard that investment.
