Landlords are in high demand across the UK, with agents registering huge numbers of tenants seeking homes at their branches. How can the issue be tackled?
The situation in the UK’s private rented sector is one of a major supply and demand imbalance right now. The reasons for this are vast and varied, but the latest figures from ARLA Propertymark show how things are playing out across the country.
Availability of rental homes has been dwindling, according to multiple reports. Some landlords have seen the past couple of years as a good time to cash in on the huge capital gains they have made on their properties. Others have decided to exit the market due to some of the latest rules and tax changes imposed by the government.
Meanwhile, the number of renting households has been on the rise for many years. There are also more adults living alone in rental accommodation, and the age of the average first-time buyer is also rising. A lot of people are also relocating due to the pandemic, and many opt to “try before you by” by renting in an area they are considering.
London in particular is facing supply shortages, says ARLA Propertymark. The total amount of rental stock registered with agents has fallen by 71% over the last 12 months, according to the latest data. Meanwhile, the average number of new prospective tenants in December peaked at 67 per branch; the highest number on record for the month of December.
Tenants seeking homes
The country’s growing rental market is a hot topic in the housing sector at the moment, with more households than ever living in rental accommodation for longer. The build-to-rent sector is picking up at an astonishing rate and will plug some of the gap as tenant demand remains strong.
Propertymark’s report showed that there were 67 new prospective tenants registered per agency branch for the month of December. The highest figure was in the West Midlands, where there were 106 tenants per branch.
The region, which includes Birmingham, is becoming an increasingly important business hub away from London, so will continue to attract swathes of new inhabitants; many of which want to rent.
Bringing landlords to the market
Ensuring new landlords continue to invest in the UK property market is paramount to meeting this demand. The sector remains one of the most attractive asset classes, particularly with the heightened demand from tenants coupled with future house price rises.
But changes in policy could do more to attract investment, says Propertymark’s CEO Nathan Emerson.
“Our latest report shows a usual December dip, however, when compared with historic data the demand agents have seen has still been unusually high. As the private rented sector was under the microscope of policy makers last year and house prices boomed some landlords decided to exit and consider other options.
He adds: “It’s important that new landlords are enticed into the market to provide much needed homes.”
Rental prices rising
The situation is inevitably leading to rising rental costs for tenants as the market is competitive. Propertymark found that 56% of member agents had reported rent prices increasing. This was even higher in the north-west, where demand for rental homes is huge; 78% of member agents reported price rises.
Price fluctuations are affecting certain parts of the market more than others, and the past two years has exacerbated this. The pandemic has led to drastic lifestyle changes for thousands of people, with home-working changing where people need – or want – to live.
Some decided that it was time to leave city life behind and live somewhere more rural or in the commuter belt, which pushed prices up in these areas. However, a large number have also since begun to return to the major cities, as amenities reopen and some employers are encouraging less home-working.
Emerson adds: “In particular, the London market has been uniquely affected by the pandemic with many people leaving the city as commuting routines relaxed.
“What we are seeing now is as people look to return to London, the landlords that were there before have left also. The lack of homes not only pushes up prices but puts more pressure on to social housing systems.”
The UK property market remains a safe haven for investors looking for excellent rental yields, great capital appreciation, and huge tenant demand. BuyAssociation can help you find the right property investment opportunity for you, so get in touch to find out more.