Demand for buy-to-let investment has increased over the past month thanks to the coming changes to stamp duty which are due in April. Landlords are rushing to register new rental properties before the deadline when an additional 3% stamp duty will be charged.
This information formed the core of the December Private Rental Sector report by the Association of Residential Letting Agents (ARLA), which also reveals the current surge in buy-to-let investment follows a seasonal lull in which the availability of rental properties was limited, with the average number of registered tenants falling from 34 in November to 29 in December.
Rent Costs Also Falling
Tenants also experienced a reduction in rent increases during December. Just 18% of tenants with ARLA-associated letting agents saw a rent hike during this period which has been confirmed as the lowest of 2015 and a drop of 5% from the amount in November.
The Managing Director of ARLA, David Cox, said, ‘As we’d expect in December, the UK saw a lull in activity, with people putting off any moves until January. The supply of housing stock was down, and fewer tenants were on the hunt for new properties. It’s reassuring to see the number of agents reporting rent increases is still on the decline – some encouraging news for tenants as we start 2016.’
Rent Costs Predicted to Rise after Stamp Duty Changes
Unfortunately, the small number of rent increases is unlikely to last beyond the tax reforms beginning in April. A lot of letting agents have showed concern at the stamp duty changes with 62% of ARLA-registered agents predicting that the additional 3% stamp duty will eventually push up rent costs for tenants. A slightly higher number, 65%, also fear the extra stamp duty will push many landlords out of the market and end up decreasing the supply of available rental properties.
Despite these fears for the future being held by roughly two thirds of ARLA agents, the stamp duty changes are currently having a positive effect on the private rentals sector. A quarter of agents have reported seeing an increase in buyers seeking to purchase buy-to-let properties ahead of the April tax rise.
ARLA’s David Cox noted that this current surge in activity could just be the calm before the buy-to-let storm. He said, ‘Buy-to-let landlords determined to complete purchases before the changes come into force in April are storming the UK housing market, meaning the lull we’d usually see is less significant. But subsequently, after April, we’re very likely to see the number of buy-to-let properties on the market begin to decrease, and this will most certainly have a detrimental effect on renters across the country.’
It would certainly be a shame if available rental properties were to decrease in response to the April stamp duty shake-up, but at least the next couple of months should see plenty of properties available for tenants to choose from.
