There are different drivers causing an increase in rents.
Increased tax liabilities on landlords are causing many to put in place an increase in rents. A study by an insurance company has found that 32.5% of landlords are planning to increase their rent in the next 12 months to keep up with increased tax liabilities and costs because of legislation changes, including the scrapping of full interest relief on mortgage payments.
At the same time, a bottleneck of housing supply has caused the average cost of renting to rise in July to £874 per month according to letting agents Your Move. This is an increase in rents of 3.1 per cent over the previous twelve months with every UK region other than the south west experiencing an increase in rents. Wales at 4.3 per cent has seen the largest increase whereas rents have fallen by 2.2 per cent in the south west. London has continued to rise on average by 1.2 per cent but this masks considerable variation in performance in different areas of the capital.
The number of rented properties coming to market has declined following the changes to the buy to let market introduced in April last year. The introduction of a 3% stamp duty surcharge on second homes and buy to let properties coupled with a phasing out over four years of full tax relief on mortgage interest payments has dampened investment in the buy to let sector.
Despite the increase in rents recent research suggests that most buy-to-let landlords do not plan to change the size of their portfolios, with 83% of buy-to-let investors not looking to increase or decrease their property portfolio in the next 12 months.
In fact, just 14% of private landlords are looking to expand their portfolio within the next year.
For advice on investing in the buy to let market contact our team of experts at Source Investments