Amidst sky-high mortgage rates and the highest tax burden since the Second World War, the rental market continues to experience an unprecedented decline in the number of available rental properties as an increasing number of landlords are pitted to exit the market.
As a result, bidding wars between prospective tenants have, unfortunately, become commonplace within Britain’s supply-poor rental landscape. Exclusive data from Cornerstone Tax, the UK’s leading group of property tax experts, has found that almost 1-in-5 tenants across the country have, over the past two years, admitted to losing out on a property that they wanted to rent due to a bidding war.
David Hannah, Group Chairman of Cornerstone Tax, is available to discuss the current state of the nation’s rental market and the measures that should be taken to encourage more young people to get on to the property ladder.
The figures from Cornerstone Tax illustrate a significant North-South divide between tenants across the country, with 25% and 28% of renters in London and Southampton, respectively, facing the most intense competition for dwindling rental stock.
According to David Hannah, a reason for these regional disparities may be the flight of landlords from the South to the North of England due to comparatively lower property prices and the region’s inclusion in the government’s Levelling Up Scheme.
New data from the Office for National Statistic’s reinforces this claim, with the North East overseeing the highest annual house prices percentage change of all English regions in the last 12 months to September 2023 (1.6%), while the South West saw the lowest at (-1.6%).
Hannah asserts that record mortgage rates combined with the highest tax burden since the second world war have pushed many buy-to-let landlords out of the market, reinforcing a supply crisis that continues to squeeze budgets of tenants.
Despite last week’s Autumn Statement offering some relief to landlords by way of the unfreezing of the local housing allowance (LHA), Hannah argues that the roots of the current crisis remain largely unaddressed.
David Hannah, Group Chairman of Cornerstone Tax said, “Our data highlights a clear issue in the UK’s rental market. Many of these landlords took out mortgages on buy-to-let schemes during a period of sustained low interest rates; fast forward to 2023 and the pressure currently facing landlords is simply too much.
“Spiralling interest rates and the highest tax burden since the second world war have forced thousands of landlords to sell up, which then puts further pressure on renters due to a lack of stock.
“We are generally seeing an exodus of landlords from the capital and South East, looking towards the North East of England instead. It’s a region that’s seen the highest growth in property prices in the last twelve months, with many seeing it as a much safer investment than the capital.”
“The current strain could have been eased in last week’s Autumn Statement by way of removing the second home surcharge from bona fide private rental sector investors and giving them a reduction in their acquisition costs as well as, reinstating full relief for mortgage interest payments in common with other businesses that have to borrow money to provide their services.
“This double measure would have both reduced the costs of purchase, whilst allowing landlords to freeze, or even potentially cut, rents which have had to have both these penal measures “costed in” over the last few years. It would also stimulate purchases in the market at a time when owner occupiers are unable to purchase because of affordability issues.”