Tuesday 18 April 2017

Monthly Lettings Index – March 2017

One in five homes let, owned by a company landlord – a record high

  • In Q1 2017 the proportion of homes let by a company landlord (landlords who own their property through a limited company) reached a record high of 20%
  • Changes by government to tax relief on rental properties owned by individuals is encouraging more landlords to buy and own homes through a limited company
  • The proportion of homes let by a company landlord increased 6% when compared to Q1 2016 – the biggest increase recorded
  • One in four (27%) of properties let in London are owned by a company landlord
  • Rents in Great Britain fell 0.3% compared with March 2016 to stand at £928 pcm

The proportion of homes let by a company landlord reached 20% in Q1 2017, the highest proportion since records began in 2010 (table 1).  The numbers have been steadily rising since 2013 but Q1 2017 recorded the biggest annual jump (6%).  Changes to tax relief on rental properties, announced in the 2015 Spring Budget may be behind the rise. 

The changes to income tax relief on mortgage interest payments are being phased in over a four year period (until 2020) and took effect from this month (6 April 2017).  They make it more tax efficient in some cases for landlords to own their buy to let portfolios through a company rather than hold as a personal asset. 

Landlords letting homes in London are most likely to own their property using a company name.  27% of properties let in London are owned by a company, a larger proportion than anywhere else (table 2). Company landlord lets drive the top and bottom of the rental market with the most and least expensive homes likely to be owned by a company landlord.  Over the last year, a quarter of homes let by a company landlord cost less than £500 per calendar month (pcm) (table 3). Nearly one in ten homes (9%) let for between £1500 and £2000 pcm were owned by a company landlord, compared to 6% owned by non-company landlords.

Rents fell in March 2017, the cost of a new let was 0.3% lower than in the same month last year, the second consecutive monthly fall.  The average rent of a new let in Great Britain fell to £928, £3 less than the same period last year.  The fall in rental growth was driven by London, the South West and Wales where rents fell by 0.4%, 0.2% and 6% respectively (table 4).

Commenting Johnny Morris, Research Director at Countrywide, said:

“The number of rented homes owned through a company is on the up. The incoming tapering of mortgage tax relief is likely driving the increase.  Companies are generally taxed more favourably, particularly with recent changes by government to tax relief, so in many cases landlords can make cash savings by operating through a company rather than as an individual.

“Rents fell again in March, mostly driven by falls in London.  Stock growth continues to outpace demand in the capital, giving tenants more negotiating power, pushing down rents.  In much of the rest of the UK rents continued to grow, although at a slower rate.”

About the Countrywide Lettings Index and new methodology

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.