We’re only halfway through March and already we’ve had a few interesting pieces of news! First, the budget came along without the reversal of landlord tax proposals and without changes to recently-introduced stamp duty changes, and then we heard that average monthly rent prices (for newly-let properties) has fallen for the first time in 6 years. So what exactly does this all mean for the housing market and what can we expect to see in the coming months?
The two items of news are linked, such that one piece caused the other! The changes made last year in terms of stamp duty meant that a lot of investors ran to the market and bought up housing stock in order to avoid the extra duty. That then creates an overly-stocked rental market, and therefore landlords can’t ask top dollar or their properties because of an imbalance in supply and demand. Now, when we talk about the market being over-stocked, I think it’s clear that in certain sectors of the market there’s a serious shortage of houses, and there’s certainly a challenge in terms of landlords who won’t rent to people receiving benefits, but the general view across the country shows that the over-stock drives the prices down. There are simply more landlords in need of tenants!
With all that in mind, what can we expect moving forward? I certainly see a lot more investors moving from private ownership of their properties to commercial ownership. This will give them a (potentially) better tax stance and avoid having to pay the increased rates that the budget brought. I would also expect a shift, albeit a small one, in landlords letting to benefit recipients. It will get to the point that landlords simply have to get someone into their property if it’s empty, and whilst this will only affect a small number of landlords in the market, it’s still a significant change.
Maybe the buy-to-let market will decline a little. Those properties which would be an ideal “investment property” will suddenly become a little overpriced because of supply-demand imbalance, and some investors may even feel it’s time to get out of the letting business because of their extra tax bills. Will this force prices down in the sales market? I doubt it. I think there’s enough movement and sales activity to keep the prices level. Some first-time buyers may get a better deal on their purchase, but I can’t see a whole-market change.
Overall, whilst the news may worrying to some investors and potential investors taking their first dip into the lettings business, I’m expecting business as usual. We’ll have the usual ebb and flow, with a few investors having to make changes to their working practice to protect their profits.
We’ll update this article as more news comes out during March.