Landlords continue to be inundated with prospective tenants competing for each property on the market, as tenant demand remains high across much of the UK.
The buy-to-let sector continues to experience extremely high levels of appetite, exacerbated by rental supply levels falling below the required number despite the number of homes to let increasing by almost a fifth compared with last year, according to the latest Zoopla Rental Report.
This means landlords who remain in the game are managing to let their properties extremely quickly after listing, and generally achieving asking rents in many parts of the country thanks to the fact that they have a wide choice of tenants to choose from.
According to Zoopla’s data, there are now an average of 21 tenants competing for each rental home that becomes available, meaning tenant demand vs supply has more than doubled since pre-pandemic levels.
Naturally, the highest quality rental stock is receiving the strongest levels of tenant demand at the moment – particularly with energy efficiency and energy bills being high on the agenda and pushing lower-EPC rated stock lower down the pecking order – and agents are urging more landlords to offer this higher level rental stock in order to plug the gap and fulfil the demand.
Marc von Grundherr, director of Benham and Reeves, said: “There remains an incredibly high demand for good rental accommodation and we simply don’t have the supply reaching the market to satisfy this demand.
“As a result, properties are being let at an extremely quick pace and this supply and demand imbalance is driving rental values ever higher.”
Tenant demand pushing up rents
Zoopla’s findings show that average rents were £1,245 per month in July this year, which is £63 per month higher than 12 months ago, and represents rental growth for new lets of 5.4%.
While rental price growth has slowed compared with a year ago, this statistic is being pulled down by the London rental market, where prices have risen by just 2.5% over the past year. In contrast, rents are climbing at an above average level across most of the rest of the UK, including smaller cities and towns.
These areas outside of the country’s major cities tend to be more affordable, and are rising in popularity among homebuyers, renters and therefore property investors. Northern areas including Oldham and Darlington are highlighted in Zoopla’s report, with rental growth of 11% and 10% respectively, where tenant demand is especially high.
Landlords can expect more of the same
With no major market or economic changes currently on the cards to boost rental supply – or effective measures to significantly boost first-time buyer numbers in order to lower the level of tenant demand – it seems that landlords can expect to continue to see high levels of tenant demand for their rental homes.
According to Zoopla, current trends and the imbalance between housing supply and tenant demand will run into 2025, and rents are expected to be 3-4% higher by the end of this year.
Richard Donnell, Executive Director at Zoopla, said: “The slowdown in rental inflation is being drawn out by a lack of homes for rent and continued strong demand, driven by the unaffordability of home ownership. Rental inflation is slowing in some major cities where rents are high but they are still increasing quickly in more affordable areas.
“Any new policy or tax changes that result in a reduction in supply will simply push rents higher hitting low-income renters hardest. It is essential policymakers focus on growing the stock of homes for rent as the primary route to slowing rental inflation and improving choices for renters. As things stand the growing unaffordability of renting is the only route to slower increases in rents.”
Landlords and investors need more support
While property investors will always target areas with high levels of tenant demand in order to ensure a steady supply of interest in their properties, industry body Propertymark believes more should be done to support both sides of the market to make things more sustainable.
Nathan Emerson, CEO of Propertymark, said: “The rental market has been suffering from a lack of supply against an ever-growing demand for a concerningly long period of time. The housing sector continues to see issues escalate year on year and the real-world effects is that renters face an increasing challenge to secure a suitable property for their needs.
“With tax changes and additional liabilities being imposed on many landlords, plus increases to the general cost of living and mortgage repayments this places extreme pressure on operational costs. This, put against a backdrop of the Renters’ Rights Bill introduction, has the potential to add further uncertainty to the mix for current and prospective investors and contribute to worsening already worryingly low supply levels.
“It is important that any new legislation is introduced with a balanced and fair approach for all parties involved to help encourage long-term investment in providing high-quality housing in areas that desperately need it.”
