Government policies will not halt increasing demand for rental homes

The rental market is predicted to grow by one million homes over the next five years, in spite of government policies designed to clamp down on private landlords and turn “generation rent into generation buy”.

While the government has a target of building 400,000 new homes for sale over the period of this parliament, global real estate agency, Savills, claims that the UK is still in need of 220,000 homes to rent each year.

In a new report, Rental Britain, Savills states that the supply of rental homes is set to be restricted due to new government policies.

The introduction of a Stamp Duty surcharge of 3% on buy to let properties and the restriction of tax relief on mortgage interest payments are likely to limit the ability of private investors to expand their portfolios.

The report also highlights the fact that recent economic recovery and the continuing low interest rate environment have in no way dampened the demand for rental housing.

Conversely, house price inflation, which has surpassed wage growth, has pushed home ownership further out of the reach of many, while rental stock in the social sector has been diminished.

‘Mismatch between supply and demand will continue to underpin rental growth and attract increasing numbers of institutional investment at scale,’ the report states.

Given the restrictions which the new government policies are imposing on private investors, significant opportunity has arisen for large scale investors to step into the gap which has arisen due to a fall in off-plan sales to private buy to let investors.

In 2015 Savills recorded investment deals worth a total of £2.6 billion, a third of which was supported by institutional investment.

Furthermore, the lack of available stock is prompting an increase in deals to forward fund development for rent and investors are looking beyond London to cities with concentrations of households in the rental market.

Savills highlights Manchester, Reading, Edinburgh and Bristol as cities with the best investment potential.


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