A surge in demand for rented property over the summer in the UK has outstripped rental supply, new research shows. 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, according to Winkworth’s latest quarterly review analysing trends and the outlook for the UK residential property sales and lettings markets.
In contrast, the number of rental properties on the market in August was over 50% lower than a year ago. Dominic Agace, chief executive officer of Winkworth, said that this shortfall in supply has pushed up rents:
‘Rentals have seen 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,’ he explained.
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,’ he added.
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. The continued supply and demand pressure is likely to push average rents up further and the lettings market has swung dramatically in favour of landlords as an average six applicants chase every available property in London. This is a dramatic rise from eighteen months ago, according to London estate agent Marsh & Parsons. In April 2009, fewer than two applicants were looking for every property on its books.
The situation is worse for tenants in particularly sought after areas of South London, including Clapham, Barnes, and Battersea. The ratio has risen from 2.5 potential tenants to over 12 in the last 18 months. As a result, prices for lets have soared and landlords have started giving statutory notice to tenants in order to re-let the property and charge higher rents.
‘Anyone who signed a tenancy agreement twelve months ago might have got a good deal at the time -but they may face having notice served on them by landlords who are keen to earn a higher rent,’ said Patrick Littlemore, director of south west lettings at Marsh & Parsons.Examples include a two bed flat in South Kensington’s Onslow Gardens which went for £610 per week a year ago and has just been re-let for £700.
While a family sized house on the Moore Park Estate near Fulham Broadway with an asking price close to £1,500 per week had three competing offers within 48 hours, letting close to the asking price.
‘This is not a simple seasonal change. This time last year, there were only 3.5 times as many applicants than the number of available properties. Last year the supply was better than it is now and I expect this situation to last right up to Christmas. And the fierce competition for lettings property means the good times have returned for landlords. Rents are the highest they’ve been for nearly two years,’ said Littlemore.