UK Residential Rents Set to Rise

As tax increases begin to bite for private landlords – and more are on the way – private sector rents are expected to rise.

But, with the number of homes in the UK still below the level of demand for them, there will be little that tenants and prospective tenants can do but pay them.

The main tax increase that landlords are currently coping with is the stamp duty land tax increase for owners of more than one home. Of course there are ways to make a purchase without having to pay that tax – buying a mixed use building is one and making purchases through a limited company is another. But the tax increases don’t end there.

Following the Chancellor of the Exchequer, George Osborne’s 2015 Autumn Statement, from 2017 landlords will no longer be able to offset their mortgage interest payments against their rental profits, before their tax bill is calculated. This is another major blow to the profitability of being a landlord in the private rental sector (PRS).

In response to these two significant changes, there are signs that rents have already begun to rise at a slightly faster pace than usual. A recent report from buy-to-let lenders Kent Reliance show that in 2015 average monthly rents in the UK rose 3.5% to £872. And, further increases are expected with around 40% of landlords stating they expect to increase rents by an average of 5.6% or £49 per month over the next six months.

“As the cost involved in running a business increases, so too must the price of the services,” Kent Reliance said in its Buy-To-Let Britain report.

In the meantime, a separate survey shows that demand for private rented property is on the up. According to BDRC’s quarterly survey for Paragon Mortgages, 39% of landlords reported an increase in tenant demand in the first quarter of 2016, up from 34% in the fourth quarter of 2015.

The survey also reports some 79% of tenants are satisfied with their landlord, and 69% of tenants say the rent they pay represents “good value for money”.

Those results highlight the importance the PRS plays in the UK’s housing market – something both landlords and tenants appear aware of.

‘It’s good to see tenant satisfaction at such high levels,” said John Heron, director of mortgages at Paragon Mortgages. “This survey clearly demonstrates that the PRS is increasingly providing longer term solutions in housing and that responsible and professional landlords are supporting the provision of housing.”

If rents continue to rise faster than they have been in previous years, the level of tenant satisfaction may dwindle. But then again, if there are no other options, disappointment with rents won’t stop people paying them or landlords charging them.


That goes to show that the increasing importance of the PRS should not be understated and that’s something the Chancellor and the Financial Policy Committee should always keep in mind.


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