A top London letting agent working for Knight Frank has commented on the 'irony' that the government's series of tax changes aimed at the buy-to-let sector have made rents - particularly in Prime Central London - less affordable.
David Mumby, a London regional lettings head for the global firm, says that rents have been pushed up in the capital due to tax changes, originally aimed at easing housing affordability issues, restricting property supply.
Over the last few years, the government has introduced a 3% stamp duty surcharge on buy-to-let purchases and begun to phase out buy-to-let mortgage interest tax relief.
"Although there hasn’t been a mass exodus of landlords, we are starting to see some landlords exiting the market and I would expect enough of a decline in supply over the next couple of years to keep pushing up rents,” says Mumby.
He points to June when annual rental growth returned to the Prime Central London market, after a 28-month absence, due to supply levels reducing.
The agent says that the government's plans to offer three-year minimum tenancies as standard - the consultation for which closed last week - could 'exacerbate' the situation.
"Buying something you can sell if you need to and buying something to lock away for three years are two completely different propositions. It will raise liquidity concerns for property owners,” he says.
He suggests that the reason more landlords have not sold up as yet is due to continued access to cheap buy-to-let finance.
"When you can get a five-year fixed rate at a loan-to-value of 75% of below 2% that’s attractive by historical standards," Mumby explains.
He says he expects landlords with a long-term plan to remain in the market, but that his firm is seeing fewer new landlords entering the sector with higher numbers than before selling up.
*Graham Norwood is on annual leave, returning Tuesday September 11. Conor Shilling will be undertaking editorial duties in his absence. Please send any press enquiries to firstname.lastname@example.org.