Positive prospects for London's rental market in 2016

The New Year may well see the stirrings of a mini-boom in rental accommodation, as landlords step up investment in buy-to-let property ahead of the introduction of the new stamp duty surcharge on April 1.

In his Autumn Statement last year, the Chancellor announced plans to increase stamp duty on BTL purchases and those buying second homes with an additional 3% on top of the normal rate of duty. 

This is likely to add between £3,500 and £7,500 to the cost of a £250,000 property, so prospective landlords are rushing to beat the deadline to enter the buy-to-let market or to add to their existing portfolio of properties.

As a result, tenants in the capital are set to reap the benefits of this increased supply.

A recent survey amongst existing landlords showed that 60% of them intend to make an additional property investment before April 1 to beat the new stamp duty imposition, indicating the potential for a huge boost to renters across the UK.

“Any potential boost to the current stock in the private rental sector is to be welcomed”, says Stephen Ludlow, Chairman at ludlowthompson. “This is particularly the case in London where there remains a lack of supply and huge demand. 

"There’s often a surge in activity in London’s rental sector during the first few months of the year and we’re expecting this to continue in 2016 as landlords rush to make buy-to-let investments and tenants eagerly snap this property up.

"It may be a sensible move for landlords to buy property before the new stamp duty rate kicks in, given that the longer-term investment case still stacks up once you have taken the non- allowance of interest against income into account.” 

As a final point, investor returns have averaged around 10% since the turn of the millennium, emphasising the long-term strength of London's rental sector.