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Private rental sector: critical supply and demand

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The shortage of private rental accommodation has reached crisis proportions, warns the Residential Landlords’ Association (RLA) in an article posted on the 12th of December.

The report cites the findings of the Royal Institute of Chartered Surveyors (RICS) Residential Market Survey for November, which reveals a 29% fall in instructions from landlords that were received by surveyors. The drop is double that recorded in the same period for 2018.

The shortage is compounded by a continuing demand for private rented accommodation from prospective tenants.

That stark imbalance between supply and demand is almost certain to fuel significant increases in future rent levels – estimated to increase by 2% in the year ahead and by as much as 3% during the next five years.

The crisis has been brewing for some time, says the RLA, as punitive levels of taxation and other measures have discouraged many existing and would-be landlords for investing in such property.

A posting in our Knowledge Base on the 16th of October recorded the most recent surge in demand from tenants at a time when more landlords are selling properties they currently own than are investing in new properties to let. The typical buy to let mortgage represents a loan to value (LTV) of only 33%, while mortgage repayments soak up an average of 25% of rental incomes – now with no tax relief on mortgage interest repayments.

The RLA is calling on government to tackle the problem urgently by using budgetary reforms to ease the financial pressures on landlords and to revive the incentives for investing in such critically needed accommodation.