Buy-to-let owners have been particularly badly hit as they face increasing mortgage rates and higher taxes.
Figures released recently by HMRC showed that 2.71 million individuals declare a rental income on their tax returns. But they also revealed that this number was down 50,000 on 2019.
Nick Lyons, CEO at inventory specialists, No Letting Go, comments: “There is a chronic shortage of houses in the UK and the private rented sector is critical.
“At the moment, there’s a huge demand for rented homes and that has pushed rents up. But the growing amount of administration around compliance and the proposed changes to allowances in capital gains tax is making some landlords wonder whether they should continue or sell up before the new arrangements come in.”
More specialists
Chancellor Jeremy Hunt announced in his Autumn Statement that CGT allowances would be halved from £12,300 a year to £6,000 in April 2023 and further to £3,000 the following year.
At the same time, the Government is proposing to introduce new legislation in the form of the Renters Reform Bill which looks set to introduce a range of measures that some believe are ‘anti-landlord’.
These include:
· The abolition of Section 21 evictions
· The appointment of a new ombudsman for the sector
· A new decent homes standard
· Changes to rent increases
Lyons continued: “Compliance is a big issue now and the bureaucratic burden within the sector is becoming heavier. This is why more and more landlords are turning to letting agents to manage their portfolios and why there are more specialists, like us, providing services. The entire sector is becoming more professional and that’s a good thing.
“It may become more difficult for individual landlords to muddle along managing properties themselves – they are going to need more professional support to keep across all the changes that will inevitably come along.”
Although no date has yet been set for the Renters Reform Bill, most commentators believe it could be introduced in 2023.
The PRS is dominated by individual landlords – 80% of them own just one property. A world away from them are the institutional investors. They appear to be more interested in the Build-To-Rent (BTR) market which attracted record investment last year.
BTR homes are specifically designed and built for the rental market and are mostly aimed at young professionals. As of July 2022, there were an estimated 74,000 BTR homes in the UK – although this made up just 1.5% of all rental stock.
Even so, some analysts believe BTR could grow to 380,000 homes by 2032 – making the sector worth £170 billion.
The new research, by the British Property Federation and Savills, forecasts that in ten years’ time, 8% of UK homes for rent will be purpose-built. And although the BTR boom began in London, since 2017 there has been a shift towards other major UK cities, led by Manchester, Birmingham and Leeds.
Lyons concludes: “There’s still a lot of activity in the sector.
“There is a vast housing need in this country and the PRS holds the key. When everything settles down, the regulatory changes become embedded and mortgage rates begin to ease, people will see the value of growing their portfolios once more. I believe the sector has a rosy future – it has to. The UK depends on it.”
