Savills Say Rents To Go Up By 20%. They’re Wrong. It’s More.

So in their latest report, Savills have suggested that rents will go up faster than house prices.

 

Specifically, that rents will go up by 20% over the next 5 years.

While that’s good news for landlords, and bad news for tenants, it’s not the whole truth.

They’ve made this prediction based on the following

The reason was “post-referendum economic uncertainty” and weaker consumer sentiment.

And it’s wrong because, with all this talk about #Brexit, they seem to forget a few fundamentals.

It’s not just Savills that do this – all the UK press miss this point.  It’s 3 fold.

  1. Removal of mortgage interest relief.  Which basically means if you have rent of £1,000 and a mortgage of £900 then your profit SHOULD be £100.  Pretty obvious.  But coming soon, is where actually your profit on that £1,000 is £1,000. So 20% of that tax wise is £200.  Meaning you actually make a loss in real terms.  Guess what. Either the landlord sells the property (thus tightening supply) or they put their rents up.
  2. Stamp Duty increase on 2nd homes. So now landlords are looking elsewhere for their investments. In other words not property. In other words not buy to let. So in other words, another constriction in the supply of property.
  3. Removal of wear and tear allowance. We used to be able to claim 10% of this wear and tear allowance. That’s now gone. I’m not surprised about this one, it’s probably about time.  But it still stings. So the result will be less landlords again.

We’re heading towards a perfect storm of MASSIVE rent rises.

Here’s what they say about house prices and rents …

House prices v. rents
Year House prices Rents
2017 0% +2.5%
2018 +2% +4%
2019 +5.5% +5%
2020 +3% +3.5%
2021 +2% +3%
Five year total +13.1% +19%
source: Savills

 
And if Savills have only place their forecasts on the doom and gloom of #Brexit, and missed these 3 points completely, then rents will shoot up far quick and by much more, than the 20% they’ve quoted.

So it’s either – get in the game, or lose out.

I’ve been a landlord for 17 years – had some pretty difficult times.  But I’m so glad I have my portfolio which continues to pay my bills each month.

Is it about time you got into the game too ?

Daniel Latto

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