Government must recognise renting comes before homeownership

 

Renting before buying is a given for thousands of people across the UK, so providing enough rental stock is vital to ensure high standards in the industry.

The huge number of tenants seeking rental homes is showing no signs of abating, according to new research, which could be good news for landlords operating in high-demand locations.

A survey by the National Residential Landlords Association (NRLA) discovered that 56% of private landlords noted a rise in demand for their properties in the final quarter of last year. In Q3 2021, the figure was 57%, with the very minor dip showing appetite remains strong.

However, the sector is not without its troubles. Like the sales market, a dearth of supply means there is less and less choice for tenants, with many candidates fighting for each property and sometimes turning it into a bidding war. Some tenants are even having to sign up without viewing, just to secure a home.

Government should focus on renting households

In recent years, the government has come under fire from many in the industry due to its measures to make property investment and buy-to-let less attractive. This includes the 3% stamp duty surcharge all second property buyers must pay, as well as the Section 24 tax relief changes that have affected many landlords.

There is also added scrutiny in the sector, with new licensing rules, safety standards and energy targets, although for the most part these are recognised as a positive move to improve standards.

But as more people than ever find themselves renting for a number of years before buying, the government should stop trying to quell investment in the sector, says Ben Beadle, chief executive of the NRLA.

“The rental housing supply crisis is only set to worsen, as renters continue to feel the effects of a market starved of a healthy supply of homes for private rent,” he says.

“The government needs to accept that for all the rhetoric about homeownership, many people need to rent beforehand. Policies that dampen investment in the private rented sector serve only to reduce choice, drive up rents and, as a result, make homeownership more difficult to achieve.”

Future plans for landlords

The NRLA’s latest research also found that almost a quarter (24%) of existing landlords plan to reduce the number of properties they are renting out. By contrast, just 14% said they plan to purchase a new property to let.

In another stark set of figures, a report from Capital Economics shows that, if changes are not made, we could lose more than half a million properties in buy-to-let in the next decade.

The study said that the private rented sector supply actually needs to increase by 227,000 homes a year if it is to meet the demand for 1.8 million new renting households over the next 10 years.

Is property still a good investment choice?

Despite the figures showing how many landlords plan to reduce their stake in the sector, there is more to the story. Some landlords may be planning to reinvest in short-term rentals, for example.

Another recent set of research found that people in the UK still see the most value and potential in the country’s housing market over other investment choices.

The survey by Finder.com found a total of 29.6% of people believe property will be the best performing investment in 2022, accounting for the highest proportion of respondents.

The UK property market has seen consistent house price rises alongside a strong appetite from buyers in recent years. Latest ONS data shows prices increased by an average of 10.7% between December 2020 and December 2021, bringing them to an average of £293,339.

Renting out property can bring in extremely strong yields if you invest in an area of high demand. Many investors find the best yields in the north of the country, where housing is more affordable but where growing numbers of tenants are relocating.

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