The Royal Institution of Chartered Surveyors (RICS) is today pleading with the UK government to focus more on rental properties than home ownership. This may come as a surprise to many people, especially when you bear in mind the billions of pounds the government has put aside for homeowners, but the RICS believes the UK is headed for a rental home squeeze. They forecast that by 2025 an additional 1.8 million people will be looking to rent property. This will certainly go down very well with buy to let investors but how can the UK government address this growing issue?
Reduced investment
It will come as no surprise to learn that 86% of landlords in the UK have no plans to increase their buy to let portfolios over the next 12 months. This is due to a number of reasons such as the economy, Brexit and the fact that David Cameron’s previous governments increased the tax burden on buy to let/property investors. If this trend does not change in the short to medium term there could be a serious shortage of rental properties in the UK.
As the UK authorities were happily increasing the tax burden on property investors they were warned of the potential long-term implications. Many forget that while public investment can make a difference in the property market it is private investment which is required to fulfil the bulk of demand going forward.
Have first-time buyers been put to one side?
Reading the RICS it does look as though the institute has effectively given up the fight for first-time buyers in the UK. While this does seem a little harsh on future first-time buyers let’s not forget the fact that UK house prices are well out of the reach of many. Over the years we have heard talk of “affordable housing” but very often this involves shared ownership or a similar arrangement which artificially increases demand for property. As and when individuals in shared ownership arrangements decide to increase their share of the property the value will likely have gone up and in many cases it may be difficult to raise the finance required.
The idea that more focus should be based upon the rental market is certainly at odds with the UK government’s current strategy for the property market. It will be interesting to see whether the new Prime Minister does take note of this report by the RICS or whether indeed playing to the masses and home owners of the future may be more lucrative from a political point of view.
Time for difficult decisions
It is very easy for governments of the day to play to the masses by helping first-time buyers climb aboard the ladder when in reality many cannot afford the properties they want without financial assistance from the state. The idea of increasing the number of properties available for rent seems to make perfect sense although a side-effect would be to push property prices higher and higher, further out of the reach of future first-time buyers.
This is a difficult conundrum for the UK government but one they will have to address sooner rather than later.