Zoopla has released its latest Rental Market Report, revealing a continued mis-match between supply and demand which has seen rental properties 24 per cent below pre-pandemic levels.
The shortage has been blamed on investments by private landlords being stalled and tax changes in the autumn budget could potentially result in landlords selling. Rental demand overall has weakened but reports have shown that 21 people compete for each rental property – twice that of the pre-pandemic average.
Zoopla’s Rental Market Report has shown that rental growth for new lets currently stands at 5.4per cent, half the rate compared to a year ago but still higher than the growth in average earnings (5.1per cent). Average rents stand at £1,245 per month in July 2024, £63 per month higher than a year ago.
A lack of supply remains a major challenge for renters due to low levels of new investment by private landlords. The number of homes for rent is up by almost a fifth on last year off a low base.
Concerns have been raised that issues with rentals escalate ‘year on year’ and renters face ‘increasing challenges’.
Nathan Emerson, CEO of Propertymark comments on Zoopla’s latest Rental Market Report:
“The rental market has been suffering from a lack of supply against an ever-growing demand for a concerningly long period of time. The housing sector continues to see issues escalate year on year and the real-world effects is that renters face an increasing challenge to secure a suitable property for their needs.“With tax changes and additional liabilities being imposed on many landlords, plus increases to the general cost of living and mortgage repayments this places extreme pressure on operational costs. This, put against a backdrop of the Renters’ Rights Bill introduction, has the potential to add further uncertainty to the mix for current and prospective investors and contribute to worsening already worryingly low supply levels.
“It is important that any new legislation is introduced with a balanced and fair approach for all parties involved to help encourage long-term investment in providing high-quality housing in areas that desperately need it.”
As one-off pandemic factors fade, mortgage rates fall and tighter visa rules reduce migration for study and work, there are still over 20 people competing for every rental property. Zoopla claims this ‘explains the continued impetus for rental inflation’.
A lack of new investment in private rented homes has created a scarcity of homes for rent, compounding the strong growth in rents over the last 3 years (+30 per cent). Increasing the supply of homes for rent is essential to help to alleviate the scale of rent rises in the face of sustained demand.
Our data shows a steady flow of landlords selling homes since 2016. Over one in 10 homes for sale on Zoopla (12.5 per cent in July) were formerly rented. Higher mortgage rates have acted as an additional catalyst for landlord sales over the last two years on top of tax and regulatory changes dating back to 2016.
The Government’s new proposals for rental reforms as set out in the Renters Rights Bill, are already factored into many landlord decisions on whether to exit or remain in the market. However, speculation over tax changes in the autumn budget that might impact landlords, may well result in an increase in sales of rented homes, further eroding supply for renters and pushing rents higher.
The lead time to complete a property sale runs to over 20 weeks which means it is too late to start now in the hope of completing before the Budget. However, a delay in any changes to taxation that impact landlords could result in more landlord sales in the short term.
The slowdown in UK rental growth is being driven by much lower growth in London (2.5 per cent) and a slowdown in other major UK cities (5.8 per cent). Rents are rising at an above average level across much of the rest of the UK, covering smaller cities and towns where rental costs are lower and offer better value for money. Some of the fastest rent rises are in affordable areas adjacent to these larger cities with six postal areas registering 10per cent or above annual rental growth.
