40% expect rents to be higher in 12 months’ time, a significant increase on the 27% who forecast rises in Q2 2009.
Miles Shipside, commercial director at Rightmove, comments:
“Tenants are as close to the coal face as you can get, and their growing view is that rents are on the way up. With tenants staying in properties longer, and fewer landlords expanding their portfolios, supply is being outstripped by demand in many areas and higher rents are the likely outcome. Tenants’ sentiments in this survey are spot on.”
Our survey also reveals that the movement from the rental sector into owner occupation is at a virtual standstill. The Rightmove Consumer Rental Forecast a year ago recorded 58% of those surveyed stating they would like to buy but could not afford to, compared to 59% now.
On a regional level, the South East (64.2%) is most affected by affordability issues and the West Midlands (53.5%) the least.
Miles Shipside adds:
“The on-going mortgage famine has meant a consistent demand by lenders for substantial deposits over the last year and there is a strong correlation between this and the frustrations of would-be first-time buyers unable to get on the ladder. It is unlikely these figures will change until lenders can access much more wholesale funding, or potential borrowers can save up the bigger deposits required.”
One positive effect of the likely increase in rents is that the improved returns on landlords’ property investment portfolios, could lead to them buying more. While finance remains restricted in the buy-to-let sector, higher rents could persuade more lenders that investing in professional landlords is now a safer bet.
Shipside continues:
“Professional landlords are canny investors, and will be assessing what returns they can earn in property versus other investments. With cash in the bank earning low returns, this forecast rise in rents could drag more landlords in.
"They are badly needed to help satisfy growing rental demand, but are likely to be sitting on their hands at the moment till there is greater clarity on the new Governments Capital Gains Tax proposals.”
The new Capital Gains Tax proposals present an interesting dilemma for the new Coalition Government. With a pressing need to address the record deficit, there is widespread speculation that the existing flat rate of tax on gains on non-business assets will be increased and brought closer in line with higher rates of income tax. Such changes will not be helpful to the health of the rental sector.
Shipside summarises:
"At a time when we are heavily reliant upon the rental sector to satisfy the nation’s housing needs, the likely changes to Capital Gains Tax rates will seem like pretty bitter tasting medicine to many existing landlords. It will also look like a pill that many would-be landlords will be unwilling to swallow, at a time when rental returns are looking more positive."
