Almost a third of private landlords with a buy-to-let mortgage face the prospect of significantly higher costs this year according to new research.
Data compiled by research consultancy BVA-BDRC for the National Residential Landlords Association has found that 63% of landlords have a buy-to-let mortgage on at least one property. Of this group, 29% plan to re-mortgage at least one property over the course of the next year. The Bank of England has forecast that by the end of the year, monthly repayments for buy-to-let landlords are expected to rise on average by around £175. It has warned that a fifth of landlords with such a mortgage will face increases of over £300.
The NRLA argues this will exacerbate an already serious supply problem in the rental market. According to the Bank of England, the mismatch between the demand for, and supply of rented housing, is in part a consequence of higher borrowing costs. In a sign of the supply crisis facing tenants, the research found that 65% of landlords in England and Wales confirm that demand for private rented housing increased during the final quarter of 2022. This was up from 56% who reported increased demand during Q4 2021. Despite the strong demand, 30% of landlords said they plan to cut the size of their portfolio in 2023, the highest level of planned disinvestment seen in more than six years. Just 9% said they plan to increase the size of their portfolio over the next 12 months, down from 14% who said the same in Q3 2021.
The NRLA is calling on the Government to accept its call, and that of the cross-party Levelling Up, Housing and Communities Select Committee, for a review of the impact of recent tax rises on the sector to boost the supply of properties to rent. The Committee rightly concludes that “landlords with small portfolios are currently critical to the provision of private rented accommodation.” It argues that a tax review of this kind should “make it more financially attractive to smaller landlords.”
Rent rises slow as more tenants stay put
Price growth in the rental market is predicted to continue throughout 2023 but there are tentative signs that rent hikes are slowing, says a high profile agency chief. Nicky Stevenson, managing director of Fine & Country UK, says, "that while the average monthly rents are still rising, indications suggest that the supply constraints which have underpinned record rental rises are easing.Rightmove report the number of available homes to rent in the final quarter of 2022 was up 13% with the number of new properties to let up 5% year-on-year. However, significant pressure remains."
She notes that affordability concerns are a key consideration across the market and a large portion of agents confirm that more than half of renters continue to choose to renew their lease as opposed to moving.
The average prime market rent is now a hefty £3,718 and the 16.7% annual price growth it’s seen has moderated slightly from its peak last summer. Stevenson says, " that more than five million households in England and Wales, equivalent to one in every five, now live in the private rented sector according to the recently released findings from Census 2021. The number of households living in the sector has risen 29% since 2011, with 89 per cent renting from a private landlord or letting agency. In London there are now more than one million households in the sector, compared to 1.5m owner occupiers. All regions in England and Wales have seen an increase in the number of households in the private rented sector since 2011, with the greatest increases observed in the East of England, East Midlands, and West Midlands."