Rent prices will continue to rise while rental stock falls in the UK in 2018 with the abolition of stamp duty for many first time buyers unlikely to have much of an impact, according to agents.
With further interest rate rises expected, Brexit negotiations continuing and the cost of living escalating, the property market could see significant changes in the coming year, according to the Association of Residential Letting Agents (ARLA) and the National Association of Estate Agents (NAEA).
Some 59% of letting agents think rent prices will rise next year, compared to just 19% who predict they will decrease while 62% expect the supply of rental stock to fall in 2018 and 53% think demand will continue to rise, the ARLA research shows.
It also reveals that 70% of letting agents expect private rented taxes to rise further next year, as agents start altering their business models to survive in the wake of the Government’s ban on tenant fees.
‘This year was a big one for the lettings industry and tenants felt the effects of this. Unfortunately, it looks like rising rent costs are going to continue into the New Year as agents need to be moving into a 0% fee business model by October, which will push rents up as the costs are passed through landlords and onto tenants,’ said David Cox, ARLA chief executive.
‘There is a lot of other regulation making its way through Parliament next year, which will more positively affect the rental market however including regulation of the industry, housing courts and longer term tenancies. While these policies will be developed rather than implemented, they should start to affect the market as agents adapt their businesses in anticipation,’ he pointed out.
‘In terms of the supply of rental properties, which agents largely expect to fall, we need to remember that the minimum energy efficiency standards coming into effect in the New Year could see up to 300,000 properties being taken off the market because they don’t reach the minimum requirements. This will also in turn push rent costs up,’ he explained.
‘Overall, the industry is going through a seismic change and the lettings market we know today will be radically altered over the next five years. This change will be painful for agents, but we firmly believe that the industry will come out of the other end stronger, more professional and with a robust reputation among consumers,’ he concluded.
Almost half, some 43% of estate agents expect house prices to fall next year. The majority, 44%, expect supply to remain the same in 2018 while 29% think it will decrease. Some 32% think demand will decrease in line with this, but 46% expect it to stay the same, according to the NAEA research.
Just over a third, 34%, expect incidences of gazumping to decrease in the New Year too, while the trend of renovating rather than moving is expected to continue as 60% think more home owners will do this.
‘It’s been a big year for the housing market, with the Government pledging to improve the house-buying process, and stamp duty relief for first time buyers coming into effect. However, looking ahead to next year, more than half of our members don’t think the first time tax relief will have a real impact on the number of sales being made to the group’ said Mark Hayward, NAEA chief executive.
‘Further, agents expect supply to remain the same but demand to grow which sounds like bad news, but if we can improve the process of buying a property, we’ll be making vast improvements to the sector which will ultimately make it easier and provide more certainty for first time buyers,’ he pointed out.
‘Our members want to see stamp duty relief rolled out nationally to all buyers and hold out hope that housing stock will increase. This will be a case of wait and see the Government has made many such promises in the past which we’ve never seen translated into reality,’ he added.