Where are we heading? | MIH Property Management

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Q4 2024 outlook

As the summer draws to a close we pause to take stock and look ahead at what’s on the horizon in the Rental Property sector…

SUPPLY AND DEMAND

The ever-increasing interest rates of 2023 had a profound affect on mortgages and borrowing. Low rates are long gone, possibly never to return. Many Landlords and property owners found managing a property portfolio increasingly difficult with financial viability squeezed to the absolute limit. The result of this was a reduction in London rental stock as Landlords sought to offload property to reduce the financial burden. The knock-on effect was a scarcity in availability of rental homes – and burgeoning rents.

Current statistics suggest that this is starting to settle down with demand for rental homes slowing slightly, though competition is still high in sought-after areas. A small reduction in interest rates marked the beginning of a potential turn of the tide, though to date we remain in a neutral position with no further reductions on the horizon.

THE ECONOMY IS STABILISING

As compared with this time last year, inflation is coming under control and the UK economy is showing some encouraging signs of growth. Following a turbulent few years where the general cost of living exceeded wage increases, there is a sense that things are returning to a more sustainable balance. As a result the steady hike in monthly rental charges seen over the last year across the UK and especially in London, is also slowing down. Good news for all. Tenants can cease worrying about further dramatic rises and Landlords can cease worrying about having to inflict them in order to cover costs.

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The highest year-on-year shift has, once again, been recorded in the Southwest, where average rents are up by a huge 13% compared to the previous year.

The West Midlands and Greater London continue to see the smallest year-on-year rental increases, with increases of 2-3% in average costs.
Goodlord

NEW HOMES

On the plus side, new housing projects and government initiatives backed by the freshly installed Labour government>, are expected to help balance the supply and demand equation in the longer term. It’s good to see some of the obstacles to housing development being reduced or removed, but it will still take some time for the rental landscape to return to the more buoyant pre-Brexit/pandemic/cost-of-living levels. Nevertheless, the way forward is now tracking in the right direction and there is hope for change.

…But…

There have been concerns that Capital Gains Tax (CGT) on buy-to-let property could be increased in Chancellor Rachel Reeves’ next budget at the end of October, in an attempt to plug a £22 billion budget deficit.

In simple terms, CGT is payable on the ‘gain’ made when selling a property i.e. the difference between the price originally paid for the rental property and the price it is later sold for. At present, the UK capital gains tax allowance is £12,300 per person, meaning you pay no CGT on the first £12,300 of any gain you make. Add your gain to your income: you’ll pay 18% on the amount below £50,000 and 28% on any amount above. (Other factors may affect this calculation).

Hence there is speculation that a raid on Landlords could be in the offing:
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The average landlord would be £11,000 worse off under a Labour capital gains tax raid, analysis has shown.
MSN

Others argue that hikes in CGT simply cause the owners to sell the asset ultimately leading to a decrease in CGT revenue. This would lead to a mass exodus of Landlords from the property market and cause further upset to the precarious balance of home availability/affordability. Not what the government is aiming for – so this theory, of course, remains to be seen.

On the horizon

All in all, there is a sense of things pending as we await a more definite impetus. A lift in the economy, a further reduction of interest rates, a new wave of global optimism, or a flash of inspiration would be welcome! We are perhaps for the present becalmed and somewhat stationary – but calm at least – and that’s something to appreciate for now.