Renters should prepare for a "calm before the storm" as recent tax increases on landlords take effect, according to a letting agent. The Your Move and Reeds Rains Buy-To-Let Index for March 2016 said the average rent in England and Wales rose 3% over the year to £791 a month.
Chancellor George Osborne has hit landlords with several tax increases. He increased the basic rates of stamp duty by 3% for purchases of additional property and cut tax reliefs for maintenance and mortgage interest costs. Landlord groups warn this will drive some out of the sector and deter others from coming in, reducing the supply of rental property at a time when it is in high demand, which will force up rents.
"As the spring market warms up, recent weeks may have been the last of the best deals for those signing a new tenancy," said Adrian Gill, director of lettings agents Your Move and Reeds Rains. "Into April, market rents will start to build a gradual but inevitable path, ultimately reaching the very peak of the market in the autumn. Early spring is just the calm before the storm."
Rents are growing fastest in the East Midlands, where the average rose 8.5% over the year in March to £613 a month. Neighbouring West Midlands had the second fastest rental growth. The average rose 6.7% to £597. In London, where rents are highest, the average grew 4.6% to £1,231. The worst performance was in Wales and the North East, where rents fell 2.2% in both regions to averages of £551 and £507 respectively.
"Early 2016 records for the Midlands demonstrate the direction of travel this year," Gill said. "Demand for homes in the private rented sector is driven by the flow of jobs and the flux of a generally more mobile workforce looking for a place to live. This reflects the strengths of private renting – the opportunity for young independent adults to strike out on their own, or for families to move across the country and earn the best possible livelihood.
"But this regionality is also the core challenge for the private rented sector. In the towns and cities with the biggest renting populations it is a constant struggle for supply from landlords to match demand from tenants. With a surge in jobs and local economic activity, rents rise. Keeping pace will not be easy, and will depend on the freedom to invest as a landlord."