The raft of regulation changes that have hit the buy-to-let sector in the past 18 months are finally filtering through, with landlords passing on rising costs to tenants, new research shows.
According to the latest Your Move Buy to Let Index, the average rent in England and Wales has gone up 3.1% in the past year to £874, suggesting landlords are raising rents in response to buy-to-let tax changes.
Last April, mortgage interest relief for residential buy-to-let properties was reduced to the base income tax rate, which is 20%. Landlords were previously able to claim tax relief on the top rate of tax of up to 45%.
The changes mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.
Property investors looking to buy a second home have also been hit by a 3% stamp duty surcharge as part of the Government’s plans to curb the buy-to-let market and free up property for first-time buyers.
The effects of these policies have restricted the supply of new lettings properties coming to market, with the fall in stock levels pushing up prices for tenants.
Richard Waind, director of Your Move, said: “We are now starting to see the real impact of the Government’s stamp duty revision, plus the additional tax changes which have hit landlords hard.
“The outcome has been a decline in the number of rental properties on the market and this has had the effect of pushing up prices for tenants.”
In London, prices have grown 1.2% in the last 12 months to reach an average of £1,283.
The strongest performance came in Wales where prices have grown by 4.3% in the last 12 months to hit an average of £595.
Three other areas saw growth of more than 3% in the last year. In the South East prices increased by 3.6% to reach an average of £884 while in the East of England the typical rent is now £873 per month after 3.3% growth.
Meanwhile, the North West saw price increases of 3.1% in the past 12 months to reach an average rent of £630.
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