The buy-to-let landlord continues to have their finances squeezed, for example through the cut to mortgage interest tax relief – the full effects of which will be felt from April this year.

Since 2016, 132,000 buy-to-let mortgages have been redeemed across the UK. The lack of supply this is causing is starting to have an impact on some parts of the prime rental market. With more regulation to come, how far will supply be further reduced?

Regulation

The consultation of Section 21 of the Housing Act to abolish no-fault evictions looks to provide further support to tenants, alongside other suggestions such as lifetime deposits. But there could be unintended consequences of the abolition of Section 21 that may be counter-productive. Some landlords may choose to sell, causing further supply issues in the market and creating upwards pressure on rents. And for committed landlords, rent review provisions will become much more of a focus.

Over the past four years, we have seen the nationality of landlords across prime London continue to diversify. International landlords have increased their share of the market from 27% in 2016 to 35% in 2019. However, the proposed additional 3% stamp duty surcharge for non-resident international buyers may prove to be a limiting factor for new supply coming from international landlords.

New build stock

While the development of new prime schemes over £1,000 per sq ft across London have slowed amid Brexit-related uncertainty, there is stock still under construction that will soon be completing. Some of this will come to the market as rental stock. Currently, the completion of this supply is expected to peak in 2021. This will likely provide competition to existing stock of similar price, and may suppress strong rental growth in the short term.

Beyond the individual private landlord, the market for institutionally owned purpose built rental stock continues to grow. There are 20,000 build to rent homes now complete across London, with many schemes due to complete soon, such as Wood Wharf at Canary Wharf. Though this type of stock has increased, it is unlikely to replace the stock sold by those individual landlords exiting the market.

_{Read the articles within Prime Residential Rents below.}