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Monday 11 April 2016
3% stamp duty deadline floods rental market
The Countrywide Monthly Lettings Index for March reveals the first signs of the impact of changing landlord behaviour in response to the Government’s introduction of the new 3% stamp duty surcharge.
Many investors brought forward purchases to beat the introduction of the new surcharge applied to all those who own more than one home, which came into effect on the 1st of April. Countrywide’s whole market estimates show £28 billion worth of home sales were completed in March ahead of the deadline, a 76% increase on the previous year. Landlords accounted for 23% homes sold in March compared to 13% in the previous year. In the two weeks running up the deadline, half of all homes sold were to landlords.
This surge in landlord activity means more housing has been made available for tenants to rent. 22% more homes were brought to the rental market in Q1 of 2016 than in Q1 2015 and has contributed to lower rental growth rates compared to last year. The percentage increase in the number of homes to rent has not been matched by the increase in the number of prospective tenants looking for a home which has put further downward pressure on rents. The number of tenants registering was up 16% in the first three months of 2016, compared to the same time last year.
London experienced the largest increase in new rented homes, up 40% on Q1 2015, but lower growth of tenant numbers, up only 8% over the same period. This has resulted in a rapid deceleration in rental price growth with rents in Greater London growing 2.9% in March, less than half the 7.4% recorded in 2015.
The average UK rent rose 3.4% in the year to March 2016, two thirds of the rate in March 2015. Rents grew fastest in the East of England, increasing by 8.5% over the year. Growth in the East of England was driven by increasing numbers of new tenants registering in the first three months of the year, up 34% year on year, the highest increase of any region.
Commenting, Johnny Morris, Research Director at Countrywide, said:
“Quite at odds with the intentions of the policy, the first measurable effect of the introduction of the new stamp duty rate has been to increase the number of homes owned by landlords, although this will likely be a temporary affect as we see reduced investor activity in future months.
“The increase in supply of homes to rent from landlords bringing forward purchases seems to have taken the edge off rental growth. A similar increase in tenants looking for a home to rent though would indicate this may not persist. The large number of sharers, and people living with parents means there is a big store of pent up demand in the rental market.
The Countrywide Lettings Index has been running since 2012 and we continually seek to improve its accuracy. From June 2017 the methodology was changed to reduce the impact of seasonality and volatility in the rental market.
While the index remains a mix adjusted series, rent and rental growth figures for each month are now based on a three month rolling average rather than lets agreed in the last month. The most expensive decile of homes let has been excluded to reduce volatility and the mix has been updated to include the most recently published government stock statistics.
The Countrywide Lettings Index uses data from Great Britain's largest letting agent to track changes to the cost of renting. The index is based on the 90,000 homes let and managed by Countrywide in each year, adjusting for their location and type. It is based on achieved rather than advertised rents and the published monthly rental figures are an average of the new lets and renewals of tenancies over a rolling three month period.