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rent increases in 2017

Letting agents are anticipating rent increases in 2017 ahead of the tenant fees ban.
ARLA’s November Private Rental Sector Report found the number of tenants experiencing rent increases continued to decrease, at 16%, from 18%, but this could all be set to change.
Following the Chancellor Philip Hammond’s announcement to ban letting agent fees for tenants during his Autumn Statement, eight in ten agents expect to see rent hikes in 2017.
The report found the number of rental properties managed per branch was 185, an increase from 180 in October, but lower than the 193 recorded in September.
Demand from prospective tenants fell again in November to 32 prospective tenants registered per letting agent branch, compared with 34 in October, however 53% of agents expect to see a rise in demand next year.
David Cox, managing director of ARLA, said: “The number of rent hikes reported by letting agents continued to decrease in November, and it’s a shame the ban on letting agent fees will have the opposite impact on rent prices when the measure comes into force.
“The buy-to-let market is becoming less attractive for investors as the ban on fees, combined with the scrapping of mortgage interest relief and the stamp duty increase on second homes push costs up for landlords. So unfortunately, regardless of the uplift we saw in supply this month, we expect to see the number of properties available to rent fall next year.”

Sales volumes sharply reduced!

Sales volumes of prime homes right across the country have been hit hard, cutting the Government’s take from Stamp Duty Land Tax by millions. Asking prices have also been sharply reduced, as the top end of the London market has crashed.
In the six months from May to October there was a 75% reduction in sales of properties above £10m – down to just 15 from 61 in the same period last year.
There was also a 51% reduction in sales between £5m and £10m – a fall from 201 to 99.
There was also a 33% drop in sales between £1m and £2m (7,285 falling to 4,913) and a 36% drop in sales between £2m and £5m (down from 1,473 to 947).
Worst affected was the prime new-build sector where there was a 83% reduction in the number of sales of new homes above £5m. This equates to a fall from 52 in the same period last year to just nine in the six months from May to October.
According to analysis of Land Registry figures by investment firm London Central Portfolio, the reduction in sales activity above £1m between May and October could have cost the Exchequer nearly £500m.
The firm says that the fall could be as much as £1bn by the end of the financial year.
London Central Portfolio CEO Naomi Heaton said: “This slowdown in the luxury property market – a big contributor for the Exchequer and UK economy in general – is very concerning, particularly as the Government faces wider economic and financial instability in the face of Brexit.
“With an already increasing deficit to address and the Government’s declared intent to increase tax revenues, these statistics should make some worrying reading for Chancellor Hammond.
“Having missed the opportunity to reconsider Osborne’s strategy at the Autumn Statement, we hope the Government will now look to relax some of these measures before there are detrimental knock-on effects for developers, the Exchequer’s balance sheet and the wider UK economy.”
Most of Britain’s most expensive homes are concentrated in London, where high-end agents have made job cuts and developer Berkeley Homes has slashed its prices  by around 10%.
Separate research, by Propcision, has also shown huge cuts, of up to 46%, in asking prices of some London properties.
Michelle Ricci, co-founder of analyst firm Propcision which has an ‘add on to Rightmove’ which is neither approved nor authorised by the portal, said some of these properties had ambitious pricing to begin with. Her research shows that since June, the price cuts became more concentrated in central London as the Brexit vote compounded pre-existing problems in the market.
The blame on the central London housing market crash has been put on an increasingly harsh tax regime scaring off wealthy purchasers.
While there might not be much sympathy for this segment, there must nevertheless be concerns about a market that needs to flow freely from top to bottom.
Specifically, as agents know, what historically happens at the top end of the market tends to ripple down – and that what happens in London, tends to spread out.

Rent rises are likely to accelerate in 2017

Rent rises are likely to accelerate in 2017. A third of landlords expected to increase rents in the next 6 months alone, by an average of 5.4% - equivalent £571 per year for households. Two thirds cite higher future taxes, and 43% the strength of tenant demand. Indeed, twice as many landlords are seeing an increase in tenant demand as the number seeing a decline. The recent budget announcement to ban letting fees, while providing a welcome reduction in tenants’ upfront costs, will see any additional costs for landlords factored into rents.
Extra pressure will also come from the Prudential Regulation Authority’s new underwriting standards, due for implementation next year; these will see landlords needing to demonstrate higher yields to secure finance, unless they can provide larger deposits. As a result, Kent Reliance forecasts that rents will rise by an average of 3% in 2017.
Growth in the number of households has moderated, growing at 5.4% in September compared to 5.5% in the first quarter, with 5.3million rented households in total. Combined with strong house price growth, the value of the PRS in Great Britain has risen to £1.3trn, with £174bn added since September 2016.  
Andy Golding, Chief Executive of OneSavings Bank, had this to say: “Property investors have had to roll with punches in 2016. The stamp duty levy clearly took its toll on the market, and combined with the forthcoming tax changes, landlords have felt at the mercy of a political agenda. But confidence is returning as landlords take action to limit the damage to their finances. The use of limited companies is soaring, and rents are increasing, even after one of the biggest surges in rental supply in recent history.
There is still more to come for the buy to let sector next year. The PRA’s new underwriting standards are due to be implemented, the tax changes begin to take effect, and there is yet more potential intervention in the form of the FPC’s new powers. If the cumulative effect of constant change undermines the expansion of rental properties, this will simply exacerbate the housing crisis.
The raft of recent measures aimed at the buy to let sector singularly sought to increase home ownership levels. Ironically, they will achieve the opposite, with even greater upward pressure on rents combined with the prospect of declining real incomes likely to stretch affordability even further. We have warned all along that the tax changes will push up rents, and this is already starting to happen. The ban on often unjustifiably high letting fees is well intentioned. However, it also means landlords could pass higher costs onto tenants, doing little to bring down the overall cost of renting.  
Only through a substantive and long-term building programme across all tenures will we see an end to escalating house prices and rents. The Chancellor has moved to provide more support for house building, but it is not yet enough to see the step-change in supply that we need.”