You’ve reached the Experience Invest blog – your one-stop-shop for UK property market news. New research suggests nearly every London borough saw its rent prices increase in 2015.
A report from Benham & Reeves Residential Lettings indicates that practically every borough in zones one and two of the UK capital saw rent values rise by over 4% between 2014 and 2015. Rents only dropped in two places; Richmond-upon-Thames and a small area around Central London’s Edgeware Road.
The report showed that further away from London’s central district, rental values became slightly more modest – although even outlying boroughs such as Ilford and Barnet saw noted rental growth in 2015. Furthermore rental values expanded most in Hackney, at 33% year-on-year and similar double digit growth was recorded in the London boroughs of Haringey, Bethnal Green and Bow.
The London lettings firm suggested that values rose because more people chose to rent a home than buy a residential property in the UK capital in 2015. Specifically, factors such as a fluid job markets and the way the UK taxes many overseas professionals made renting a more attractive living option to many last year. Benham & Reeves also argued that the recovery of the UK’s economy has driven London rental value growth, because rising household income has allowed tenants to move to larger properties.
But the report cited ‘changes in stamp duty’ as the most influential factor on London rental value growth in 2015. The average London house price now measures over £500,000, so many family homes now come with a 10%, or even a 12% for properties worth over £1.5 million, stamp duty rate. Many tenants have realised that instead of paying stamp duty, they could rent a property for many years, sometimes even in a more affluent neighbourhood than in which they could afford to buy a house.
“More attractive option”
Commenting on the release of the research, Benham & Reeves’ lettings director Marc von Grundherr was quoted by Property Wire saying: “George Osborne has done more for the rental market than any other chancellor in history. Thanks to the changes in stamp duty rates, he has made renting long term a more attractive option for many tenants. Couple that with the fact that many overseas tenants can write their rent off against tax but must pay capital gains on any property they own and renting becomes a no brainer.”
Continuing, von Grundherr advised: “We are advising landlords who are already in the market to hang onto the properties, and not be tempted to sell ahead of changes to wear and tear allowance and mortgage relief. Many nervous investors will leave the market and when they do, supply will be limited even further. The rent increases that will inevitably result will more than mitigate landlords’ extra costs.” Benham & Reeves estimated that rising demand, coupled with the anticipated exit of amateur landlords from the London market due to the new 3% top up stamp duty and other restraints will push the city’s rental values up further through 2016.
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