UK rental market review – September 2022

Figures taken from Zoopla’s latest report, published 13th September 2022

UK rental market review – Headline figures.

*Annual change in rents = +12.3%

*Stock of homes to rent vs the 5-year average  = -46%

Rental prices top line analysis

The figures above don’t surprise me.  There’s a massive shortage of rental stock right across the country and as you can see, its reduced considerably over the past 5 years as more landlords leave the sector. This disparity between supply and demand is naturally going to create price increases, its basic economics. 

“The chronic undersupply of rental homes shows no sign of changing, which means that rents will continue to post above average growth rates into 2023 despite cost-of-living headwinds” – source Zoopla Sept 2022

Urban areas are outpacing rural areas, due to the draw of more plentiful and better paid jobs in the larger towns and cities.

The rising energy costs also appear to be encouraging more tenants to move to small properties.  2 bedroom flats have grown the most, especially in July and August of 2022.   Se the Zoopla chart below:

Rise in demand for smaller properties

Rental Price Increase of 12.3%

Its worth noting, that these rental prices have been driven predominantly by new rentals.

This is probably why many existing tenants if given the choice would rather stay where they are than move to a new property.  It may also be one of the factors as to why there’s currently very low turnover in existing rental property stock.  This Zoopla graph below shows the dramatic difference between new lets and existing rental prices:

Affordability of Rent

Despite all the headline ‘noise’ around rent prices, rents are still tracking at an average of 34.4% of average UK earnings and is still below the peak in Q4 of 2015.   All the signs are that the current rises are starting to plateau, so we may be seeing the peak now.  Please see below the Zoopla chart  – rent as a percentage of average earnings:

However, due to the freeze on housing benefit payments, there is now a considerable gap between housing benefit payments and market rents.  The government needs to address this as a matter of priority to ensure that the most vulnerable in society are not being further squeezed out of the rental market.   This should be where Shelter focus their energies!

Calls for rent controls

Yet instead there’s been much noise from pressure groups in recent weeks around the freezing of rents. If anyone stops to think this through it, would be glaringly obvious that the only people who would suffer from such a heavy-handed policy would be the tenants. 

Landlords are already bracing themselves for more legislation that’s coming down the line over the next 3-5 years.  These will be costly and need to be paid for somehow.  If rents are frozen at the very time that landlords costs are increasing, many more will vote with their feet and leave the sector altogether. This will add fuel to the fire of the current housing crisis and even more tenants will be made homeless.  

“Against this regulatory backdrop, talk of possible rent controls will simply push more landlords to exit the sector, worsening the supply issue and ultimately cause rents to increase.” Source – Zoopla Sept 2022

How many more landlords need to leave the sector before the government and all these pressure groups realise that their anti-landlord rhetoric and policies cause more problems than they solve? 

In summary

  • It looks like we’ve hit the peak in rental price increases.
  • There’s now a growing trend towards smaller properties.
  • More tenants are now moving back to larger towns and cities.
  • Despite recent rises, rent affordability is still only just above the long-term average.
  • The housing benefit freeze means that tenants on housing benefits are being priced out of the rental market.
  • *Rent control rhetoric needs to stop, or it risks damaging this sector further.
  • Stock set to remain desperately low up to Q4 of 2023 and probably beyond.

*Here’s a BBC fact check article relating to rent control proposals in London: https://www.bbc.co.uk/news/business-47028342

This article has been written by Deborah from CAM Residential Lettings in Hayle. These are my opinions based on how I see the property market. Feel free to agree or disagree with me in the comments box below. All I ask is that you keep your opinions polite and measured.

If you’re a landlord, or are considering becoming one, hopefully these comments won’t put you off. If you have a good quality property and you keep on top of any maintenance and the regulations then you don’t have much to worry about. There’s such a high demand for rental properties, that this is still a great sector for investment. Its just harder than it used to be – but isn’t that with life in general?!

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