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Tomorrow (22nd November) the Chancellor outlines his budget, and it has been reported in the press that he will unveil measures to build 300,000 homes a year.
We need to welcome attempts to boost building of homes across all tenures, however, this does not solve the immediate problem and we will need a lot more than this to fix the housing crisis.
The government in the past few years has taken direct action to curb any further investment into the private rented sector.
We have seen the additional 3% stamp duty levy for second homes and the changes to Mortgage Interest Relief. Along with high house prices, out of reach for the majority of under 35’s, all of this is looking to have stalled the whole housing sector. In our latest PRS stats bulletin, you’ll see that RICS are reporting that demand and supply of homes is weakening, housing sales have dropped 17% in the past 12 months, buy-to-let lending has not recovered, and rental growth is slowing.
Our soon to be published research report is showing that the proportion of landlords who have added to their portfolio has decreased by 8 percentage points over 9 months. In the summer of 2016, 27% of landlords reported buying a property in the past 12 months, and it now stands at 19%.
At the same time, less than 40% of landlords are confident about the sector for the next 12 months, and landlords on a whole are undertaking efforts to promote stability across their portfolios at this time of political and economic uncertainty. While plans for future investment in the sector has remained flat, more landlords are looking to reduce the size of their portfolio rather than investing further.
In light of these findings, tomorrow the Chancellor needs to provide direct support to encourage investment in the private rented sector.
ARLA is reporting a 10% increase in tenant demand in September 2017, without supporting investment, removing tax disincentives (like MIR changes) and encouraging landlords to remain in the sector, there will be a squeeze on prices as supply tumbles. If the Government is truly committed to building more homes, the foundations for investment across all tenures must be put in place.