BTL rents will rise over “foreseeable future” despite Help to Buy

Strong demand for rental property and the lack of supply of new homes will push up rents for the foreseeable future, even if Help to Buy does help more tenants onto the property ladder.

Rent rises have fallen below the rate of inflation as buy-to-let landlords rapidly expand supply, but they will rebound, said David Brown, commercial director at LSL Property Services.

“A significant fall in rents is unlikely given the sheer scale of demand and fundamental restrictions on the supply of new homes.

“For the foreseeable future, rents are set to keep on rising on an annual basis, although rises may slow.”

His comments follow concerns that Help to Buy will punish buy-to-let investors, who have suffering the first fall in advertised rents in years,

Advertised rents fell in almost every region in the third quarter of 2013 to an average of £965 a month, according to the Move with Us Rental Index, published last month.

But Brown said that is unlikely to last, with three million first-time buyers still forced to rent since the financial crisis. “We estimate that around one in five people in the UK are now renting in the private sector – a proportion that’s gradually rising.

“Combined with a healthier economy and recovering mortgage market, schemes like Help to Buy will definitely have some impact.

“But even if the growing backlog of aspiring homeowners can be offered enough help, there are more and more joining their ranks every year.

“For many households, even a 5% deposit is a struggle. So for the time being at least, the rental market is more realistic – and more immediately affordable – for millions.”

For rents to fall, the supply of new homes must increase. But the opposite is happening, Brown said. “Currently, property is only becoming scarcer. Until new building catches up with new households that won’t change.

“Even before 2008 there was a long-term trend towards private renting. That more gradual trend actually started in the mid-1990s, and given today’s fundamental restrictions on new housing, it’s a shift that seems set to continue.”

Article courtesy of Introducer Today

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