Lettings Market Update

Jun 2017

The rental market in Hackney remains strong even though we have seen a 5% decrease in values since the Brexit vote last year.  When looking at the general statistics for rentals in the Borough this decrease is not as extreme as it could be. Hackney has a high number of foreign nationals renting, and obviously since the vote these numbers have dropped. We have seen a 30% decrease in tenants registering their interest to rent property in the Borough.

It’s not all doom and gloom! Over the last month we have seen an increase in business getting us close to levels pre-Brexit vote.

Over the next two to three years, if, as a landlord you decide to keep your property, we expect to see rent levels increase as there will likely be less available property to rent. This will mainly be due to the new tax laws with regard to second home rental properties. For many people, being unable to write off the interest of their mortgage payment against their tax bill, being unable to write of 10% of the annual rent as dilapidations and being taxed on the property earnings on top of their current work tax rate will force many owners into selling as their rental ‘investment’ can quite easily cost them more than they bring in through renting them.

Some owners will attempt to escape these new tax implications by transferring the property into the ownership of a Limited company, although this has its own issues: capital gains tax has to be paid when transferring property to a company from an individual, even if it is your sole residence.

The general consensus is that rental values will increase as more rental property is sold to owner occupiers, creating a shortage of available property to rent – demand with outstrip supply and force prices to increase. 

With this in mind, now would be a good time for a new company to invest in a rental portfolio, and if set up correctly, at the point of selling the company and assets only 10% tax is payable should the shareholders be eligible for Entrepreneurs Relief (https://www.gov.uk/entrepreneurs-relief/eligibility).