Property taxes need to be reviewed to persuade more landlords to return to London, said estate agency body Propertymark.
Brexit and covid-related travel bans have dramatically hit the capital’s rental stock, resulting in there being more prospective tenants than the number of properties available to rent, a situation unique to London.
The city has the lowest number of Propertymark properties managed per letting agent branch since June 2020 in comparison to all other UK regions. There are 126 homes managed per branch in London, which is significantly lower than the national average of 196.
During this same period there’s been a continual increase in the number of London based prospective tenants, growing from 98 per letting agent branch in June 2020 to 148 during August 2021.
The gap between supply and demand is particularly bad in North London, where supply is down by 49% since June, while demand has risen by 74%.
Greg Tsuman, lettings director of Martyn Gerrard Estate Agents, based in London and ARLA Propertymark board member, said: “The private rented sector is now the second largest housing tenure in England and most people in London rely on rented properties due to the high cost of home ownership.
“However, due to mortgage stress testing which has faced borrowers with yet another hurdle to overcome and house price increases, buy-to=let borrowing in London is only possible for those with very large deposits.
“In addition, Section 24 changes and extra stamp duty on second homes has meant that landlords are paying more tax than ever before. The pending changes to energy efficiency rules will also bring further costs to landlords meaning the market will continue to be unfeasible for new and existing investors.
“As a direct result we expect rents to climb. To stop this trend, and for landlords to return to the London private rented sector, the UK government needs to review its tax policies for landlords and introduce policies that support investment in the sector.”
Demand has now returned after falling dramatically during the pandemic, as Propertymark estimated that around 10% left the capital in 2020.
A number of short-term lets like Airbnbs switched to long-term rentals due to the loss of tourism, which resulted in there being a flood of stock, leading to a fall in rental values by around 30% over the period.
Now London is reopening the capital is desperate for more rental supply to house returning tenants.