A reduction in supply of rental property available; across the UK agents have reported a massive increase in tenant demand for the third quarter in a row resulting in the third and largest successive rise since the figures started to rise. At the same time many landlords are putting their properties on the market – recent ARLA report confirms.
For many years tenants have had the upper hand when it comes to the choice of rental property, and were in a position to negotiate with landlords looking for the “right” tenants, however, with the consistent increases in demand this table is turning fast, so why is this?
In our own branches we have an average of 800 tenants registered as actively looking for property at any one time, with some as high as 1500, we are seeing an average of 2 applications for every property let, and in one case we had 5 applications for one property, this is something in 20 years I have never witnessed before on such a consistent level.
Tenant demand is increasing as fewer and fewer people choose to buy, we have had the problem of tenants struggling to save for deposits to buy for some time, but now the introduction of MMR has only further added to the demand as people are more unlikely to get personal mortgages without being able to prove suitable expenditure levels, meaning more are turning to the private rental sector.
Across the areas however, demand is coming from many other sources too, in the Liverpool area the need for LHA tenancies is seeing a huge increase in demand, also in the midlands areas as people are being relocated out of London by the local councils to the other northern large cities. The Bedroom Tax added to the demand in this sector too, meaning more and more tenants who would normally have remained in the council or social housing sector are now turning to the PRS
Nationwide, immigration is resulting in massive increases in private tenancy demand, as newcomers to the country are unable to buy and therefore need to rent and this results in further increase in the PRS (Private Rented Sector)
Choice is also another big factor; many wealthy, higher end professionals are choosing to rent as opposed to buy. Traditionally only in high-end city areas, such as London, Central Birmingham and Manchester, was it acceptable for top executives to rent, as they were moving about for work, but now families that have made a “choice” to rent instead of own, many own their own properties and rent them out (to keep their foot on the ladder) but rent the home they live in.
Also singletons, the population is staying single longer, they want choice and freedom to move around as they wish, without restriction or commitment to a property or mortgage. this will be having an effect.
The sales market is appearing to increase, so it would be an easy assumption to say that more and more people are buying, but with the increase in tenant demand such as this, can this really be the case? Especially when you see some of the statistics, that such a large number of the house purchases are being bought cash, and a lot are from outside the UK, therefore not affected by MMR, it would appear this could be driven by outside investment rather than internal, if so, what does that mean?
Many traditional landlords who bought a while ago, or bought at the peak, are seeing an opportunity to sell, probably for the first time especially if they bought around 2007, at the peak. There have been a few headlines recently of large UK portfolio landlords selling to non UK investors, likeFergus and Judith Wilson, Britain’s biggest buy-to-let landlords, who are negotiating a deal for a minimum £250m for their entire portfolio from three Chinese investors. This shows that all eyes are on the UK PRS as the interest in our UK property market has heightened worldwide.
Also statistics from the ARLA quarterly market report show that whilst the overall property stock is down, some ARLA Licensed members reported that a large proportion of BTL properties that were put up for sale have since come back onto the rental market, after landlords’ bids to sell had been unsuccessful. Again this may suggest that the increase in property sales may not be from our own shores, giving a false impression to the recent increase in property prices.
In conclusion, the PRS is in a period of change, the eyes of the world are on us, tenant demand is seeing a massive rise and I cannot see how this will not continue with the demographic movement we are experiencing, the type of landlords may change in the cities, but international investors rarely buy outside of the cities, giving a great opportunity for private landlords to benefit from the wave approaching us.
For me it suggests there are very few markets experiencing such growth that you could put your money into, and to me that means that now is definitely the time to be buying more property to rent to meet this growing market demand.