Dwindling rental supply sparks support for Build to Rent

August 14, 2018 / Isla MacFarlane
Dwindling rental supply sparks support for Build to Rent

According to the latest RICS survey, rents have continued to rise, as supply of new rental properties continues to decline, prompting calls for investment in Build to Rent.

According to RICS’ July 2018 survey, 9% more respondents are seeing a fall rather than a rise in New Landlord Instructions. This is the eighth consecutive quarter in which this indicator has recorded a negative number.

This pattern reflects the shift in the Buy to Let market in the wake of tax changes which are still in the process of being implemented, as smaller scale landlords exit the sector. Significantly, the drop in instructions is evident in virtually all parts of the country to a greater or lesser extent.

While the supply of fresh rental stock to the market is increasingly constrained, the Tenant Demand indicator remains resilient. The upward momentum appears to have slowed, but the number of tenants looking for a new home remains in positive territory at a headline level.

“The impact of recent and ongoing tax changes is clearly having a material impact on the Buy to Let sector, as intended,” Simon Rubinsohn, RICS Chief Economist. “The risk, as RICS previously highlighted, is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the Build to Rent programme or government funded social housing. At the present time, there is little evidence that either is likely to make up the shortfall. This augers ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure.”

Johnny Caddick, managing director at Moda said, “This underlines the real need to encourage Build-to-Rent which could offer better choice, service and security to millions of people.

“There’s around £90bn of institutional capital ready to invest in Britain and to unlock more of this, we need a far more proactive stance from policy makers. This needs to involve a mix of planning support: less push back against well designed buildings; and tax changes scrapping the ridiculous stamp duty surcharge designed to apply to second homes buyers, not corporates.

“The housing crisis is obviously a complex web of issues interconnected and no simple solution exists. But by better supporting build to rent, the government could massively contribute to housing supply whilst supporting the need for formal professional private rented sector.”

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