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The Future of Buy To Let Part One

In the last few weeks, politicians have decided to step into an area which affects many of us. Ho...

In the last few weeks, politicians have decided to step into an area which affects many of us. Home ownership is at one of its highest levels in the UK and it is clear that the changes to the tenancy agreement in the last twenty years has, resulted in benefits to both landlords and tenants. The law has made it easier to rent a property and at the same time, the Assured Shorthold Tenancy gives the tenants a right to quiet enjoyment of the property for a period of time.

Anyone who rented property in the 70s and 80s knows the complications of tenancy agreements which allowed the tenant the right to stay in the property more or less indefinitely. In some cases, tenancies could be transferred to the of kin which meant that a landlord may never see the ownership of their property. Rents could not be increased and tenants could not be removed.

One of the proposals by Ed Miliband was to limit rent increases so that they did not increase beyond a determined amount. With more than nine million people renting properties it was clear that this was a policy that was purely playing with the sentiments of these voters.

Under the current legislation, tenants are already in a position to challenge rent increases that are unreasonable. Most landlords would check the current level of rents achieved in the market with agents and on the rental websites before increasing rents. Capping rents or rent increases below the level determined by the market could be catastrophic for some landlords. Property prices are rising and the rent on a property represents the return on the capital that has been invested. Therefore it would only be reasonable to expect rents to rise in line with property prices.

Restricting rent rises could put more properties back on the market for sale as it would destroy the confidence in the housing market. In turn, this would reduce property prices. With less property available to rent, and a lack of interest from potential investors (due to the poor yields) this policy would end up creating a shortage of affordable housing.

In addition The Royal Institute of Chartered Surveyors were quick to distance themselves from the cap on rent increases saying that it would not recommend ceilings on rent increases.

Next week we will discuss the other proposals which Ed Miliband put forward which were abolishing agent fees, providing longer tenancy agreements and their impact on the property market.

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