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Rent caps ‘will scare lettings investors away’ warns analyst

Headline-grabbing demands for more regulation and rent freezes risk frightening buy to let investors away, a leading analyst warns.

Doug Shephard is the author of the Home asking price index, a respected monthly rentals and sales market monitor.

In the latest edition he bemoans the absence of stock available for prospective tenants - a trend seen most acutely in London and especially central London.


He writes: “Clearly, the only viable path to offering more choice and stabilising rents is greater supply. Higher yields will help, but a more investor-friendly approach by central and local government would surely go a long way further. 

“Mayors and radical pressure groups who champion rent caps and further extensive regulation are simply going to scare away investors and make matters worse.”

Shephard says typical yields in London are now as high as six per cent and still rising.

He notes that what he calls “real mortgage interest rates” - taking inflation into account - are still hugely negative.

He says that, in brief, “an investor can get a six per cent return (gross) on a loan plus deposit, and inflation will erode the outstanding debt at the rate of inflation less interest.”

And he adds: “That’s about a 50 per cent reduction in the outstanding debt (in today’s money) over five years. Meanwhile, the capital value of the underlying property is likely to have increased.”

On the sales side the Home website says the post-lockdown buying frenzy is fading with stock levels recovering in all regions except London.

The site notes that recent interest rate rises appear not to be deterring buyers because, owing to inflation, real mortgage lending rates are highly negative. 

However it notes that for the same reason “real home price growth is also negative by a growing margin.”

You can see the full report here.

  • Matthew Payne

    What noone has mentioned in this debate is how lenders feel about this interference in Scotland or England. Where the rent needs to be 120-130% of the mortgage payment, with interest rates rising fast, this could actually prevent many landlords remortaging giving them no choice but to sell, let alone scaring them off.

    I wonder whether the thousands of homeless tenants will thank our legislators for their contribution on their behalf?

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    Mathew most tenants are day to day people and tend to vote labour. They won't understand or even bother. Rent freeze they will see as a v good idea. It's the conservatives who need to worry, since most landlords are mom and pop types then it's likely to mean approx 4 million voters who will abstain from voting conservative!

    Matthew Payne

    Lol, dont worry Edwin, I am a student of politics, and post regularly about the Tories chasing young urban Labour votes as they did with the Tenant Fees Act. What I was referring to was the unintended consequences that those same politicans never think about until its too late, this has the potential to be another one of those. It's of course fine to chase the votes, that's politics, but at least think about the policy design and fallout in advance.

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    Mathew the conservative party has done nothing but loot the country. Fees for all these proposed regulators and regs will be big business for some MP getting the gift of setting them up. Same as Tebbit and co denationalisating companies and putting thseles on the board for big salaries..That was also an election looser.


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