RICS calls for Government to reverse the stamp duty surcharge

The Royal Institute of Chartered Surveyors (RICS) forecasts that more than 1.8m households will be looking to rent across the country by 2025.  Between 2001 and 2014 the number of UK households renting rose from 2.3m to 5.4m households.

Oxford is widely recognised as the least affordable place in the UK with house prices at the lower end of the market being 10 times average earnings of the City’s residents and overall prices being over 15 times the average salary according to an Oxford University Study in 2015.

Not surprisingly that means demand for rented properties in Oxford is amongst the highest in the Country with over 28% of households renting in the private rented sector compared to just over 17% nationally.  That equates to some 16,000 households.

RICS recognises that as a result of the increasing demand for rental properties, it is vital that the Government change its focus from supporting and encouraging house ownership, to encouraging a greater supply of private rental properties.  It specifically, supports my own call for more property to be built specifically for purchase by landlords increasing the supply of available rental properties.

RICS also agrees with views I have expressed over recent months, that the new prime minister should reverse the stamp duty surcharge imposed on landlords, pointing to the fact that 86% of landlords’ state they have no plans to expand their portfolio of properties since the surcharge was introduced.

In Oxford this is more pressing than just about anywhere else in the UK.  House prices have risen steeply over the last 10 years and continue to offer average annual increases of 5.8% according to the latest LendInvest index.  This is reducing the rental yield that landlords can achieve on many properties to less than 5% per annum.  When coupled with the additional stamp duty burden (an apartment costing £390,000 has a stamp duty charge of £21,200 for a buy to let landlord) this can result in negative investment returns for the initial 2 to 3-year period of ownership.  Where the landlord is additionally borrowing to purchase the property, with recent HMRC legislation removing the ability for debt interest to be off-set, for many landlords the risk of investment is now too great.

Through its continued focus on home ownership, and a mistaken belief that penalising landlords would free-up more property for home ownership, the Government has failed to recognise that the affordability gap between property prices and average earnings, means that they will simply reduce the supply of affordable homes for households who wish to rent, exacerbating the already critical under-supply of homes.

Ultimately more homes need to be built and built quickly at numbers not previously achieved.  However, in Oxford particularly many new homes should target purchase by private landlords, increasing the supply of modern affordable rental properties.  In Oxford the fastest growth in terms of housing supply has been purpose built apartments, where close to 15,000 households now reside.  Expansion of purpose built apartments is critical if Oxford is to keep growing and offering great homes to its vibrant and young population.