High Demand in Rental Properties Drives Up Prices
The demand for rental properties has been at its highest level in over ten years. A lack of supply, however, has increased rent for existing tenants. Enquiries for rental properties have been 46% above average levels, while availability has been 38% lower than the five-year average.
The shortage has been driven, in part, by landlords leaving the market. Governmental regulations in relation to rental properties have started to become more stringent, especially when it comes to private landlords. One of the main drives for this has been the desire to reduce the amount of people who are renting through the private sector.
In times of more unaffordable mortgages, demand for rental properties has increased as people have been unable to buy houses. The economic uncertainty surrounding all markets has caused a sharp increase in demand for people to rent instead as they have no other choice. As more private landlords have been giving up on their rental enterprises, supply has been reduced and rents have only increased.
Fewer rental properties are causing concerns for growing levels of homelessness. Even though there has been an increase in the number of homes to buy, the unaffordability of them does nothing but deepen the issue. The supply of housing within the owner-occupier market returned to pre-pandemic levels in January, but rental properties still haven’t yet recovered.
Severe housing shortages have been a problem in the UK for many years. The target of 300,000 new homes a year hasn’t been reached, and has only gotten worse as the years have gone on. 243,000 new homes were built in 2019/2020, while 2020/2021 only saw 216,000. With fewer homes being built, the knock on effect has been fewer properties to let.
The average deposit for a house is almost £54,000. The average rent, on the other hand, is almost £1,200 a month. As rent has been steadily on the increase, saving up the average deposit has become harder than ever, especially with prices rising all over the place. As such, another contributor to a lack of rental properties is tenants staying put for longer periods of time.
To combat this, it’s important that more properties become available. As becoming a first time buyer is more difficult in the current climate, rental properties need to be readily available, which can only happen if the housing crisis is addressed. Supply shortages have limited the amount of properties that could have been built, and labour shortages have not helped matters either.
While America has some sort of rent control in place, which limits the amounts landlords can charge tenants, the UK is not looking to go down this avenue. Implementing stricter rental controls would help tenants during the cost of living crisis, but not attract more landlords to the sector. Even though regulations are becoming harsher for landlords, having a rental property can be a sure way of attracting funds as they are in high demand.