Shortage of rental properties set to hit 1.8million by 2025
THE latest figures from the Royal Institution of Chartered Surveyors (RICS) have highlighted an ailing rental
THE latest figures from the Royal Institution of Chartered Surveyors (RICS) have highlighted an ailing rental sector that cannot keep up with predicted demand.
RICS’s more recent data showed that sales of buy-to-let properties had dropped sharply since 2004’s stamp duty changes.
Compound this with 86 per cent of landlords saying they have no plans to increase their rental portfolio this year and an estimated 1.8 million new rental homes being needed by 2025 to keep up with current demand, and there’s a conundrum of epic proportions.
With rising house prices making home ownership increasingly unaffordable, it is predicted that by 2025 1.8 million more households will be looking to rent rather than buy.
However, the new RICS figures show that 86 per cent of landlords have no plans to increase their rental portfolio this year — with that trend set to remain for the next five years.
Additionally, a net balance of 58 per cent of RICS estate agents have reported a drop in buy-to-let sales since May.
The number of UK households renting property doubled from 2.3 million in 2001 to 5.4 million in 2014. However, earlier this year, the government took measures to dampen the demand for buy-to-let investments by making changes to the stamp duty threshold.
This has further reduced supply, arguably making a 2025 rental supply crisis more likely. The problem is expected to be exacerbated next year when landlords’ right to deduct their mortgage interest from their income tax bill is removed. RICS is recommending that the government takes a much bolder long-term approach than David Cameron’s previous outlook and pioneers a new build-to-rent sector, with the private sector encouraged to build properties specifically for residential letting.
Jeremy Blackburn, RICS head of policy, said: “We are facing a critical rental shortage and need to get Britain building in a way that benefits a cross-section of society, not just the fortunate few.
“Our latest figures show that there has been a 15 per cent decline in house sales to first-time buyers over recent months. That tells us that for all the rhetoric, David Cameron and George Osbourne’s Starter Homes Strategy failed to get off the ground.”
RICS is also calling for the current housing minister to adopt the existing voluntary Private Rented Sector (PRS) code, which would regulate both the build-to-rent and buy-to-let sectors and protect the most vulnerable renters.
This week has seen the GMB union warn that workers on average earnings are now priced out of the housing market right across the South East of England.
A report published by the union on Monday shows that current average house prices in the region are between seven and 18.5 times average earnings.
In the South East as a whole, the average house price in July was £313,315 — which is 10.4 times the average full-time earnings of £30,074. House prices are rising at a much faster pace than earnings, with the house price to earnings ratio now 7.8 on average across the UK.
Average house prices in the South East increased by 11.9 per cent in the year to July 2016.
The situation is most extreme in South Bucks, where average house prices are 18.5 times average earnings. In South Oxfordshire the ratio is 12.6, with the average house price being £401,411 and average full-time earnings £31,818.
A ratio of 4.5 times a borrower’s income is regarded as the maximum that banks and building societies will agree to lend.