Landlord's guide | April 2023

It is no secret that the UK’s rental market is currently dysfunctional - there are huge problems for both tenants and landlords. There seem to be fewer conversations about possible solutions. Some of these solutions are dependent on the housing market itself, whereas others on the decisions of the government.

It is worth discussing the market as a whole. In 2021, the rental market in London exploded. Data from SpareRoom between the start of 2021 and October of the same year showed the number of renters looking for rooms in the capital had tripled between, while listings continued to decline. The result was that there were seven times the amount of people looking than there are rooms available. Yolande Barnes, chair of University College London’s Bartlett Real Estate Institute, told Bloomberg that the spike was largely due to the end of furlough, easing of lockdown restrictions and young professionals returning to the City. She said “the archetypal young professional, who worked at home from their parents' place and saved money on rent, is now going back to living in real places […] There’s an element of pent-up demand.”

That pent-up demand has only been growing since last September, when Kwarteng and Truss’ mini budget plunged the financial markets into turmoil and sent mortgage costs soaring with increased interest rates. This has meant that many potential buyers have had to put their plans on hold, regardless of how much they may have saved, and instead must continue to rent.

“Property portal data shows that supply is down 46% compared with the five-year average.”

The rental problem is especially acute in the capital – the most competitive area for rentals is the west central area of London, where listings receive 86.5 inquiries on average, up from 16.1 in September 2019, and average rents in the capital hit an all-time high at the end of last year, according to the ONS with a new average of £2,011 per month, an increase of 1.1% from the previous month.

For those leaving rental properties during the pandemic, government legislature and the rising cost of living have pushed many private landlords to sell up and leave the market, further exacerbating issues of lack of supply. A recent open letter to Michael Gove, signed by the likes of members of the National Residential Landlords Association and The Lettings Industry, says plainly that “government policies to restrict landlords’ legal rights, raise minimum energy efficiency standards to an EPC band C, extend mandatory local licensing, raise taxes on property income and transactions, enhance compliance obligations for HMOs, and increase maintenance costs are putting undue pressure on landlords — most of whom have only one or two rental properties. Already, we see net negative repercussions on rental supply, with many landlords leaving the sector; property portal data shows that supply is down 46% compared with the five-year average.” The letter goes on to say, “rent increases restrict mobility and supply, with tenants frightened to move house for fear of facing even higher rents in a new home. By failing to encourage adequate supply, government policy is directly contributing to the sharp increases in rental prices.”

These measures, combined with the wider effects of the cost of living, will prevent new and existing private landlords from re-entering the market. This means those that are still active will be able to continue to dictate rental prices, which in turn will continue to impact tenants.

To see the rest of our Q2/23 Magazine, click the link below to view the articles online:

https://issuu.com/briklondon/docs/brik_magazine_-_2023_-_q2_-_issue

Photograph: London © Andre Mariani.