More evidence is emerging of the negative impact of extra Stamp Duty and the rolling back of mortgage interest relief.
Belvoir’s rental index for the first quarter of 2017 suggested that new landlords are steering clear of the sector, attributed to the various tax clampdowns.
The average number of offices seeing landlords add six to 10 properties declined from 15% to 10.9% compared with the second quarter of 2016, although offices with landlords buying up to three properties remained static.
The lack of supply has resulted in tenants with more purchasing power securing available properties, Dorian Gonsalves, chief operating officer for Belvoir, argues.
Average rents increased, year on year, by 5.75%, from £728 in the first quarter of 2016 to £770 in the first three months of this year.
Some areas of the South East reported slight falls in rent, other areas such as the East Midlands and Yorkshire saw increases of over 7% year on year, according to the index.
Gonsalves said rents were being pushed up by a lack of supply and a rise in houses in multiple occupation.
He said: “Belvoir offices are reporting a large rise in areas with low availability of properties – particularly in market towns.
“This is down to a lack of new landlords bringing new stock to the market, which we believe is directly related to recent tax increases such as the 3% Stamp Duty on buy-to-let and changes to the way mortgage interest tax relief is treated, which means some landlords may end up with a higher tax bill than profit.
“As a result of this stock shortage, properties are often rented to the highest bidder, typically the wealthier tenant, which is raising rents beyond the traditional trend.”
He said a low level of evictions reported, 90% of offices said they had one or zero in the first quarter of 2017 – shows the advantage to tenants of renting through a self-regulated, reputable agent.
He added: “Although fees are incurred, the likelihood of eviction is extremely low.
The index also looks at the main political party manifestos ahead of the General Election, with Belvoir office activity raising questions about pledges by the Conservatives, Labour and Liberal Democrats to introduce three-year tenancies.
Belvoir offices report that 43% of tenants are staying between 13-18 months, 29% are renting for 19-24 months and 18.2% are renting for over two years.
Gonsalves pointed out that this contradicts the manifestos of the main political parties which push for longer-term tenancies.
He also warns that while some initiatives may help some tenants, it is unfortunate that the general view seems to be to “curb” smaller buy-to-let investors in favour of large landlords.
He said: “This could cause a further decrease in stock levels, making it much tougher for tenants to secure a property, especially as demand is expected to continue to increase over the coming years.”