Despite growing demand from tenants, landlords across the UK predict rents will increase by just 1.8% in 2015 which will be below the rate of inflation.
That's according to a survey carried out by the lettings agent network run by Your Move and Reeds Rains which also found that a growing number of landlords are finding it more difficult to access buy to let finance.
However, the rent prediction from landlords indicates that there will be a slowdown in rent increases and it will be below the 2% target inflation figure set by the Bank of England.
Demand for rented accommodation grows
A director of Your Move, David Newnes, said: “Demand is climbing for rented accommodation and there’s little sign of it stopping. Strong growth in house prices has also lifted home ownership from the reach of many so the private rental sector will be the safety net for those who are saving for a deposit on a home.
“It's this demand which is also powering extra supply and it's encouraging budding buy to let investors as well as existing landlords to boost the number of homes to let.”
However, for 39% of landlords surveyed, the main challenge is that their buy to let mortgage repayments have increased over the past year.
Buy to let mortgages harder to get
Another 42% of landlords have tried raising mortgage finance but found it more difficult than they did a year ago which is a reflection of a tighter lending environment in the market.
The survey also found that the number of landlords who believe that now is a good time for investors to put money into buy to let has fallen from 17% last January to 10% today.
When questioned about their aims for the coming year, only 43% of landlords said that they expected to raise their rents. Of those, 57% said they wanted to cover the cost of inflation while 31% said they wanted to find and maintenance work.
Void periods begin to fall
Also, 41% of landlords said they had seen a rise in tenant demand over the last six months which reflects a growing trend of new tenancies across England and Wales.
This increasing demand is helping reduce void periods in the private rental sector and leading to a more stable income for landlords.
Indeed, nearly one in five landlords have grown their rental property portfolios in the past year because of rental demand and better yields.
Government stumps up £3.5 billion for new rental homes
Meanwhile, the government has announced new funding worth £3.5 billion to build new homes for renting. The aim is to increase the supply of purpose-built and professionally managed private rental homes to give tenants a wider range of choice.
The money will be available in the form of government backed loans for landlords building new homes for rent.
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