Private landlords were given a boost on Wednesday with the news of a £4bn cut in the social housing sector, Clear Property Investment learned this week.

Under recently-appointed Chancellor Osborne's new ruling thousands of social rented tenants will be seeking new accommodation.

Cuts in capital funding for social housing will force thousands of tenants into the private rented sector. The government in turn hopes to fund 150,000 new affordable homes over the next four years. New social tenants will be forced to pay around 80 per cent of private rents. Previously the figure was 50 per cent.

Nigel Terrington of Paragon, the buy-to-let lender said: "The decision to move social housing rents more in line with the market rate will make private rented property an option for people who wouldn't have considered it previously."

The news has put a strain on an already crowded private rental market. Countrywide reported a 44 per cent increase in new tenants looking for rented accommodation just last month. The amount of accommodation coming onto the market in the same timescale failed to tally.

Analysts warn the increased demand will lead to higher rents - good news for landlords, but an increasing problem for tenants.

Meanwhile the private sector can't cope with demand thanks to stringent restrictions on mortgages for buy-to-lets.

Mortgage lending as a whole dropped to its lowest in a decade last month, leaving pessimistic forecasts for the value of property.

Melanie Bien, of mortgage brokers Private Finance, said: "Swingeing public sector job cuts are set to have a significant impact on house prices. In those parts of the country where many are at risk of losing their jobs, getting a mortgage is going to become increasingly difficult because of the uncertainty, which will have a negative impact on prices."

Jonathan Cornell, of First Action Finance, said: "There's a chronic lack of funding in the market and with the austerity measures kicking in, the situation is going to get a lot worse. Anyone hoping for house price rises is going to be bitterly disappointed."

Areas expected to be worst hit in terms of house prices are those with large concentrations of public sector workers.

For further news on property and investments please contact any of the team at Clear Property Investment.

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