RICS: UK Rental Prices to Exceed Home Values amid Regulatory Changes

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Couple looking for a new propertyThe idea of renting private properties in the U.K. could be more expensive than buying houses in the next five years, as rent will increase higher than home prices.

According to the Royal Institution of Chartered Surveyors, the forecast may likely take place due to regulatory changes such as a stamp duty fee. These changes could force British landlords to exit the housing market in 2018.

Investment Exodus

More than 60% of surveyors believe that fewer property investors will enter the market by next year. RICS’ Paul Bagust said that the potential exodus of investors is disconcerting since a “functioning” rental market helps in maintaining a stable housing market.

The rental sector also helps in providing business to commercial bailiffs such as MS Webb & Co. and other enterprises, yet a 3% stamp duty surcharge hampers this. The new tax covers transactions for second and succeeding properties.

At the same time, experts expect investors to lose tax incentives over time for mortgage interest payments.

Rising Rentals

For renters, an obligation of paying rents became more burdensome in August when average fees nationwide, excluding London, amounted to £776. This reflected a 2.3% increase compared to the year-ago period. The increase also represented the biggest rate of annual inflation since November 2016.

In London, renters paid an average monthly fee of £1,609, up 2.5% in August. Rates in South West of England rose the fastest at 3.9%, followed by 3.7% in Northern Ireland. The sole decline in rents happened in South East, where rates dropped by 0.2% on average.

Conclusion

The rental growth in most regions in the U.K. may still convince real estate investors to hold on to their portfolios, despite regulatory changes. It remains to be seen whether they intend to leave the market in 2018.

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