Growth in the buy-to-let sector is said to be "stuttering" after landlords reacted to the recent raft of tax and regulatory changes by shrinking their portfolio or selling up altogether, a report has revealed.
According to Kent Reliance, just 1% more landlords have chosen to increase rather than shrink their portfolios in the past three months, while the number of privately rented households has risen by only 3%, or 170,000, to 5.7 million. The annual rate of growth over the past decade was about 5%, during which time the private rented sector expanded by 2.2 million households.
The combined effects of higher stamp duty costs, reforms to the tax treatment of mortgage interest, and tighter lending rules are blamed for the slowdown. Meanwhile, tenant demand has eased too, with 19% of landlords reporting increased demand in the last three months, while 23% saw demand fall.
However, noting that first-time buyer activity remains "a long way from recovering to its pre-recession levels, despite a raft of Government support measures", the report suggests the private rented sector (PRS) will continue to grow in the long term.
"In the last decade, two million fewer first-time buyers have been able to buy with a mortgage than in the 10 years prior to 2008," said the report. "Over the same period, the PRS has grown by 2.2 million households, accommodating frustrated buyers. This fundamental support for rental demand has not changed, as first-time buyers continue to struggle with affordability issues, high house prices and insufficient housebuilding."
Indeed, without a sustained recovery in first-time buyer activity, Kent Reliance forecast that 940,000 fewer first-time buyers will purchase their first home over the next decade than in the 10 years before the financial crisis. And with the ONS suggesting an additional 2.4 million households will be created in Great Britain over the next 10 years, a conservative estimate is that rental housing supply will still need to cater for an additional half-a-million households.
"Landlords were left reeling after the introduction of tighter regulation and higher taxes, while the spectre of Brexit is already weighing on the housing market," said Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy-to-let. "This has naturally deterred investment into the private rented sector, especially from amateur speculators.
"Political opinion may be set against the PRS, but without it, the housing crisis would be deeper still. First-time buyer numbers, despite recent fanfare, are a long way from pre-recession levels and with household numbers growing, and new housing starts inadequate, it is the PRS that will continue to pick up the slack."
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