How stamp duty has pushed up monthly rent in the UK
The introduction of the stamp duty surcharge 10 years ago has led to higher rents but less competition for first-time buyers.
This is according to a new analysis by Hamptons, which examined the impact of the stamp duty surcharge on second homes in the United Kingdom 10 years on after its introduction on 1 April 2016.
The surcharge is a higher rate of stamp duty paid by anyone buying an additional home, including buy-to-let landlords.
Hamptons’s analysis found that the surcharge introduced by the government 10 years ago has broadly achieved what the government set out to accomplish. In the last decade, the market has shifted from being geared towards investors and more towards owner-occupiers.
With the cost of purchasing an investment property drastrically increased by the surcharge, the number of buy-to-let investors fell significantly following the policy’s ontroduction. If this surcharge had not been introduced, there might have been 2.2 million additional households renting in the UK today.
Once inflation and historic rental trends are account for, this tighter supply of rental homes is found to have led to a 1% increase in annual rental growth over the last decade, which is equivalent to tenants paying an additional £70 per month.
This small increase in rental amounts is counterracted by the surge in first-time buyers over the same period.
With commercial landlords and investors stepping out of the market thanks to the surcharge, first-time buyers now make up a record share of purchasers and face less competition from landlords with multiple properties.
Hamptons said that in the 12 months before the surcharge was introduced, more than a quarter of first-time buyers faced competition from an investor when submitting an offer, and that figure has now fallen to less than a fifth.
Three quarters of the ‘missing’ rented homes that would have been owned by investors (around 1.4 million) are now lived in by owner-occupiers, Hamptons said.
Following a period of protracted decline, rents have once again begun to rise, with newly agreed rents in Great Britain increasing 0.6% year-on-year to £1,368 per month.
This growth was led by London, where average rents rose by 1% year-on-year, ending a protracted period of decline.
Hamptons noted that rental supply in the capital remains tight, with the number of homes available to rent significantly lower than the same period 10 years ago.
