Ahead of the Autumn Statement on the 23rd November, online lettings agent Upad is calling on the Government to have a re-think on buy-to-let tax changes. This is in order to relieve some of the pressure on both landlords and tenants and to help cut-down on arrears.
At present, 62% of landlords in Britain are experiencing rent arrears. Rents are forecasted to rise quicker than house prices over the next five years and with changes to mortgage interest tax relief coming into play in April 2017, the situation is set to worsen.
Rising rent arrears
Despite a fall in the number of tenants in arrears since the recession, Upad claims the problem is growing again. In August, nearly 10% of tenants in the UK were behind with their rental payments. There were 34,000 possession claims issued between July and September of this year.
This is why it is imperative for investors to protect their investment with rent guarantee insurance.
Savills has also predicted that rents will rise by 19% between now and the year 2021, with post-Brexit uncertainty dampening confidence.
James Davis, CEO and Founder of Upad, observed: ‘Rent arrears are becoming the fastest-growing problem for landlords, as well as tenants across the UK and this will no doubt be their biggest issue in 2017. Not only have investors had to contend with the new 3% stamp duty surcharge this year, but from April 2017, they are also facing plans to prevent landlords deducting mortgage costs from rental income and limiting tax relief on mortgage interest payments. These increased landlord costs will only make matters worse, especially for tenants who in some of the most expensive areas, such as our capital, are paying up to two thirds of their salary on rent.’
‘The Chancellor needs to think carefully about the damage that is likely to be done, primarily to tenants, particularly if people are relying more on the lettings market than the sales market going forwards in the wake of Brexit. Over stretched landlords will try to recoup these additional taxes by increasing rents, but if wages struggle to increase more than inflation, landlords will struggle to secure rises, putting the entire lettings financial model at risk,’ Mr Davis added.