Recent research shows that a surge in demand for rental accommodation over the summer has outstripped rental supply.
Tenant registrations soared over July and August, finishing 47% up on May, and the number of potential renters in August was up 14% on last year. In contrast, the number of rental properties on the market in August was over 50% lower than a year ago. This shortfall in supply has pushed up rents with price increases following a shortfall in investment in the sector by private landlords due to the suspension of buy to let mortgage products over the last two years and the selling off of “accidental landlord” properties.
While there has been some renewed supply of buy to let mortgages, these remain expensive for buyers with less than 20% equity, and with the increase in Capital Gains Tax providing a new barrier to investment, ongoing supply constraints will continue to support rents”.
The National Housing Federation recently announced that the average age of a first-time buyer has risen to 43. Lenders’ demands for high purchase deposits mean that increasing numbers of first time buyers are struggling to get mortgages and therefore renting for much longer.
As a result, properties are not coming onto the market. Limited buy-to-let mortgage options are also preventing landlords from strengthening their portfolios and bringing fresh stock to the market, so demand continues to outstrip supply.
This increase in demand and shortage of stock has led to a year-on-year rent price increase of 5% which is broadly in line with inflation. But this continued supply and demand pressure is likely to push average rents up further as we move into autumn.