Renters forced to sell their properties by rising mortgage rates and redtape
The chief executive of Foxtons said that the London property market was supported by landlords who were forced to sell their properties by higher mortgage rates, and government redtape.
Guy Gittins stated that smaller landlords who buy to let are particularly affected by rising rates. This makes many of their investment unprofitable. Moneyfacts data shows that the average buy-to-let two-year mortgage rate was 6.94pc as of Thursday.
He said that the number and type of property exchanges has increased. While the market for sales has been slowing down, some landlords have decided to sell up.
Mr Gittins stated that landlords are facing a double whammy from the government’s policy and higher interest rates.
He said: “There is always a part of the market where landlords are selling, but we don’t see the same number of landlords entering the market because of the changes in government policy five years ago that made it harder… [with] an extra stamp duty obstacle and George Osborne removing interest tax relief.”
The London-based agent announced a 9pc increase in revenue, to £70m for the first half of the year.
Rents are on the rise, and income from lettings has risen by 14pc. Rents are rising and a growing number of tenants are extending their leases to avoid the costs of moving or being forced out due to rent increases.
He said, “We’ve seen rents rise by around 12pc in all areas.”
Mr Gittins, while praising Foxtons for its success, warned that unless the Government took action in order to prevent landlords from fleeing this sector, the rental market would be plunged into crisis.
He continued: “We don’t see the same number of landlords entering the market. It is a concern, as the supply and demand are already very imbalanced. The government needs to take action to encourage landlords to return to the market.
If nothing is done to correct the imbalance, demand and supply will become out of balance.
Foxtons’ sales in the first six months of the year were 19% lower than the previous half.
Mr Gittins stated: “The market has still declined significantly from Liz Truss’s mini-Budget of last year.
We expect sales to remain slow.