Landlord's Guide | Autumn 2022

Why is there less rental property on the market?

Like all aspects of the property market, the private rental sector is going through a period of flux. A combination of the rising cost of living, the conflict in Ukraine and subsequent energy crisis, and the pandemic have put a huge amount of pressure on the rental market.

London is the epicentre of the problem. As people returned to the city after leaving during the height of the lockdown, they came back to a hugely competitive market. Many landlords sold up – some through necessity, others because they considered the business no longer viable. Others made a move to capitalise on the ‘race for space’ by selling their rental properties, or they moved to the now lucrative holiday let market. This all means the stock has been drastically reduced, while the demand has risen. The Evening Standard reported in July that in March, the number of available rental properties was 25 per cent below pre-pandemic levels, and the number of available rental properties in areas including Lambeth, Hackney and Camden had more than halved since last year. The pattern is the same across the UK, with The Telegraph reporting that between 2016/17 and 2020/21, the number of privately renting households in England fell by more than 250,000.

"In March, the number of available rental properties was 25% below pre-pandemic levels, and the number of available rental properties in areas including Lambeth, Hackney and Camden had more than halved since last year."

The latest report from LonRes describes the market as the exact opposite of deep lockdown - “a complete reversal in the state of the prime London rental market from last year. In 2021 landlords struggled to let their properties which led to rents falling, the average time to let rising, and growing discounts on asking prices. This year, the opposite is true. The lack of properties available to let means tenants are struggling to find a home and rents are rising rapidly as a result – 28% higher in June than last year and 14% higher than the 2017-19 average.”

"Rents are 28% higher in June than last year and 14% higher than the 2017-19 average."

This has meant that many of the remaining landlords have put up rental prices. Data has shown private rents across the UK rose in the 12 months to June 2022, at the fastest rate since January 2016. While some may benefit, it will have a knock on effect for the whole housing market. The increased restrictions on buy-to-let properties and mortgages, rising interest rates, and inflation, have all contributed to a drop in applications for buy-to-let mortgages. This will have a myriad of effects on the market. A healthy rental market with fair prices for tenants and responsible landlords means that aspiring homeowners have more of an opportunity to save up for a deposit.

Policies such as scaling back mortgage interest relief and the removal of the stamp duty levy measures have also put pressure on the market. Combined with large numbers of people coming back to the city, landlords who are concerned about future tax implications and costs choosing to sell, while other landlords increasing rent - this has made a perfect storm.

To see the rest of our Q4/22 Magazine, click the link below to view the articles online: https://issuu.com/briklondon/docs/brik_magazine_-_2022_-_q4_-_issuu

Photograph: Richmond Park, London © Niall O’Laoire