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Stamp Duty Surcharge Set to Push-Up Rents

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Published: 05/04/2016   Last Updated: 05/04/2016  
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The stamp duty surcharge due to begin in April will increase rent costs, according to more than half of letting agents in the UK. The amount of letting agents in agreement that the stamp duty increases will be passed onto tenants currently stands at 57%, though the number is even higher in London (73%). Another worry is that the increase in rent costs could have a knock-on effect of reducing the number of available rental properties entering the market in the aftermath of the stamp duty hike.

A relatively large 63% of agents are already predicting that supply will significantly decrease as the stamp duty increase pushes many landlords out of the market.

Research Reveals Current Buy-to-Let Increase

The research by the Association of Residential Letting Agents (ARLA), which discovered the widely held belief that rents are going to rise after April, also revealed that a small majority of letting agents (52%) have reported an increase in interest in buy-to-let properties. That amount has increased from 47% in January. Supply also increased a little during February, with demand for letting properties at 37%, which is actually the highest percentage it has been since the same time last year.

ARLA’s Managing Director, David Cox, said, “Stamp duty changes are now imminent, and as well as hitting small landlords, they will also impact institutional investors. Although members are reporting a rush from landlords trying to snap up their buy to let investments now, it’s likely that we’ll see the buy-to-let market drop like a stone come April, and probably not pick up again until next year. This will most certainly cause rents to increase, with supply dropping, as competition for the limited availability of properties intensifies.”

Housing Demand has Also Increased

ARLA’s report reveals a rise of 19% in demand during February. That works out at about 37 prospective renters registered with each UK letting agent (who are members of ARLA). Last February in 2015, that number was at 40 but dropped significantly over the rest of the year. It is now climbing back near that recent peak.

Mr Cox continued, “The demand for housing continues to intensify as supply remains an issue across most of the country. We are concerned that the government rhetoric of wanting to help people on to the housing ladder does not tally with their action of continuing to target the rental market with additional costs. Some landlords will simply withdraw from the market whereas others who can take the hit of the extra stamp duty will simply raise rents to cover the extra costs. The dream of home ownership will remain out of reach for many as we move closer towards becoming a nation of forever renters.”