Lettings market sees continued pressure on stock

Sustained pressure

The rental market continues to be very busy, with rising demand levels intensified by the usual seasonal peak in student demand. At the same time, the supply of properties available for renters remains constrained. In the last three months we registered 27 new applicants for every property listed. This continues to put upward pressure on rents with HomeLet reporting a 10% increase in May year-on-year. Renters are also choosing to renew and remain in their tenancies longer as they monitor the wider economic picture, exacerbating the supply issue.

Location, location, location

Following the exodus from cities during the pandemic, renters now live a median six miles from their workplace, compared to just five miles pre-Pandemic (Dataloft). With a return to the office, we are seeing a desire for renters to live closer to work, resulting in fierce competition between those wanting to move back in closer to city centres. However, we are still seeing a high demand for outdoor space, with 80% of applicants looking for a garden or other external area.

Changing landscape

The long-awaited Renters Reform Bill has been presented in Parliament, with the aim to make the private rented sector safer and fairer for renters. Seeking to eliminate Section 21 no-fault evictions and implement a move to period as opposed to fixed-term tenancies, the bill also includes measures to benefit landlords, such as the right to possession and the creation of a new online portal.

The rental landscape is no doubt changing. The sector is becoming more professional and is no longer seen as a short-term asset. Despite rising interest rates, the softening of sales prices means that those looking for a medium to long-term investment vehicle should not only see capital growth but also rising rents and yields. Investors without a mortgage, or with lower loan-to-values are in a particularly strong position.