UK Rental Market in 2022
It’s fair to say that over this year, and especially the last month, we have seen unprecedented fluctuations in the state of the UK economy, the ripples of which are being felt in every sector of the market.
As landlords looking to make decisions on portfolio retention, investment and potential rent reviews, trying to make any sense of the implications of these seismic shifts in Government economic policy combined with political indecision, can be near on an impossibility.
Open Property Group we have taken a look at some of the most recent information to come out of the sector and combined it with insight from some of the leading market commentators to try and provide some understanding into what is, could or maybe happening.
Many of you will be familiar with the report produced by www.propertychecklists.co.uk which provides a detailed review of the rental market and makes comment on the economic, regional and national trends that are impacting it.
The most recent report for Q2 2022 made for some interesting reading. The report comments that rents don’t typically fluctuate much from one month to the next and are typically capped by wage growth.
But, in 2022 newly let rents have been rising at double digits, why?
Well, and I quote the report “for the first time in the housing market, we are seeing demand versus stock levels tighter in the rental market than the sales market, hence higher rents are being offered by those desperate to secure a home”.
So, it’s not necessarily that landlords are demanding more rent, renters are offering it to secure the home that they want, now that is an unusual market.
Whilst this has been witnessed in various parts of the country it’s also true of London and the South. According to the Evening Standard, data from Savills shows rents in London have risen post-pandemic and in the most expensive areas, between Jan - Sept 22 rents rose in excess of 13.5%.
Savills added, “As students and young professionals have returned to the capital since the pandemic, demand for rental properties is at its highest-ever level, with the number of renters significantly outnumbering the number of homes available”. Savills have also reported a 70% increase in demand for rental properties since August 2019.
The below table illustrates how the private rental prices in the market have inflated over the last 12 months.
This is further supported by independent analysis by Sky News; listings are down and enquiries are up, with everyone fighting over an ever reducing supply in housing stock.
As stated in the www.propertychecklists.co.uk report, this phenomenon is not restricted to London and the South. Regional variations show that in areas such as Bradford there were only half as many listings in September 2022 as there was 3 years ago, with rents in some areas over 250% higher.
Surely this spells good news for landlords and investors, but does it?
Some landlords will look in the short term, to increase rents to extortionate levels, taking advantage of the market conditions. However, we believe most landlords appreciate that to maintain a stable portfolio you should ideally increase rents in line with inflation which is clearly excessive at the time of writing.
Sensible landlords manage their portfolios and keep a record of potential rentors so that they can fill a property quickly should it become available. Many landlords don’t even need to go to market now to let a property, they just use their personal list of enquirers to fill their pipeline.
Having said that many tenants are simply deciding to stay put.
Data form www.propertychecklists.co.uk suggests that 73% of agents say they have seen an increase in the number of tenants renewing their tenancies over the past 12 months.
What’s next for the UK Rental Market in 2023?
So, the question still remains, where now for the sector?
Well, it is certainly not going to get any cheaper to rent your property. Although, it’s fair to say that renters are less negatively impacted by interest rate rises that mortgage holders.
A recession, rising interest rates and cost of living challenges tend to lead to increases in demand for rental property as mortgages become too expensive. So, the pressure continues to build.
The www.propertycheklists.co.uk report indicates that growth in demand, and in the cost of rents, continues to rise across all regions and the evidence from other sources supports this.
If this remains an issue, will we get to the point where people simply can’t afford to rent or buy, without eating further into Bank of Mum & Dad and further inflating the stay-at-home generation.
Investors could be deterred from purchasing BTL properties as interest rates rise. Recent interests rate predictions have been more than 6%, so will investors want to play in that market?
There are no immediate solutions. Economic stability and a clear Government fiscal policy will stabilise interest rates over time and the cost-of-living challenges should slow demand.
However, the underlying challenges remains, we live in an era of a dwindling supply of houses and mortgage rate increase which will push private buyers away from buying.
So, there is no easy answer but, there is still a market for sensible landlords running a stable and sustainable portfolio, the next 12 months will be a challenging time for both landlord and tenant.
For more information on how we can help you take the stress out of managing your property portfolio, you can contact us now and let us make your life easier.
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