The rush to purchase buy-to-let properties ahead of the Stamp Duty deadline has caused an 8% surge in rental supply during the second quarter (Q2) of the year, according to Rightmove.
The data found that there were 8% more newly marketed rental properties in Q2 than in the same period last year, offering more choice for tenants in some areas, such as London and the South East.
Landlords caused this Q2 boost in supply by rushing to complete on purchases ahead of the introduction of the 3% Stamp Duty deadline on 1st April.
Despite a surge in supply, rents continued to rise in Q2 by 2.8% outside of London. The East of England’s annual increase of 5% is the highest of all regions in England and Wales, while the South East saw the greatest rent rises over the quarter, of 5.1%.
London experienced the highest increase in supply in Q2, of 22%, of any region in England and Wales, causing the average rent to drop by 1.1%, to just under £2,000 per month.
The Head of Lettings at Rightmove, Sam Mitchell, comments: “The big spike in March transactions resulting from a large number of investors beating the more punitive Stamp Duty tax deadline has created a rental supply boost, which is good news for prospective tenants actively looking for a new place to live. Now that the Stamp Duty changes have come in, this boost may be short-lived, as landlords consider whether or not to make further purchases.
“Our own research among landlords shows that just under a third of them are concerned that the Stamp Duty changes, plus the forthcoming tax relief changes, will potentially wipe out their profits. Once the tax relief changes start to be phased in from next year, new buy-to-let activity could slow further. However, rental demand is still outstripping supply in many areas of the country, so we may see a shift by investors to look in areas that offer better yields for long-term property investments.”
Landlords thinking about expanding their portfolios should look to some of the areas with the highest demand from tenants. The top five locations include three spots in Greater Manchester – Ashton-under-Lyne, Stalybridge and Oldham – where the average rent for a two-bedroom property is around £520 per month. A typical buy-to-let property in these areas will cost around £100,000.
Demand from tenants rose by 2% on the quarter, while it was up by 1% year-on-year in the two weeks following the EU referendum result.
Mitchell says: “Whilst it’s too early to speculate or predict any long-term impact of Brexit for the rental market, these latest figures show that it’s business as usual for tenants looking for a place to rent. Naturally, we saw a dip in demand the three days after the referendum result, but that soon returned to usual levels of searching. If confidence in buying houses does falter, it could lead to more people looking to rent, perhaps in the short-term, and that would mean that rents could rise further.”
Despite uncertainty surrounding the EU referendum result’s impact on the private rental sector, recent research has found that almost half of landlords remain confident in buy-to-let.
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