Residential rents will likely go up in 2016, while housing supply on the home-buying market is likely to remain constrained despite Chancellor Osborne’s plans for the government to step up its support of affordable home ownership.
According to the Association of Residential Letting Agents, Osborne’s plan, which includes a stamp duty surcharge of three percentage points for buy-to-let investments, will push the government’s goal further out of reach as increased costs for landlords are projected onto tenants.
“We urge the Government to re-think its proposals around reducing Mortgage Interest Relief, scrapping the Wear and Tear Allowance and hiking up Stamp Duty by three percent on buy-to-let properties,” said David Cox, ARLA managing director.
“Whilst these remain, the Government’s goal of increasing the percentage of people in home ownership is getting further out of reach. The issue of supply and demand in the rental market will be increasingly pushed to its limit with rising demand outstripping supply.”
Similarly, Mark Hayward, managing director of the National Association of Estate Agents (NAEA), argued that 2016 will see first-time buyers encounter further difficulties, as growing rent costs eat away at their income and ability to save for a deposit.
“It is important that first time buyers remain at the top of the Government’s agenda in order to help them get a foot on the housing ladder. However, if the supply, specifically of affordable housing doesn’t significantly increase in 2016, first time buyers will continue to feel driven out of the market,” Hayward said.
Separately, NAEA reported earlier this week that in November there were 10 potential buyers vying for each property on the market, as the supply deficit pushes crisis levels.
Overall sales were down by one percent and while this is typical of this time of year, sales to first-time buyers are down dramatically and estate agents believe it will only get worse, the broker noted. Over half, 53 percent, of NAEA members think this segment will continue to feel squeezed out of the market, due to the lack of affordable housing.
“Our recent Housing 2025 report compiled with Association of Residential Letting Agents and Centre for Economics and Business Research found that by 2025, house prices are set to rise by 50 percent, … [which] will impact first time buyers, second steppers and last steppers, forcing many out of home ownership,” Hayward said, arguing that the market is “faced with a crisis”.
He added that areas outside of London, in particular towns like Oxford, Bristol and Cambridge, will continue growing in popularity at the expense of London.
“These towns are intrinsically attractive, and favoured by those moving out of London whilst central London plateaus as a result of the astronomical prices.”