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Rental Market Crisis As Demand Continues To Outweigh Supply

Letting agents have highlighted a persistent high demand for rental properties, coupled with a significant decline in available supply. This imbalance is primarily attributed to the dwindling number of new landlords entering the market, exacerbated by existing tenants choosing to stay put to circumvent the hike in rental prices.

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A recent survey conducted by the Royal Institution of Chartered Surveyors (RICS) among its members has unveiled a noticeable uptick in tenant demand throughout the three months leading to January. Despite this, there’s a sense of the market cooling off, possibly mitigating the ongoing reduction in new landlord listings.

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Source: Landlord Knowledge

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Rents show ‘no sign of slackening’ rising 8.3% in January: Hamptons

UK rents showed “no sign of slackening” in January, with average letting prices up 8.3% on a year ago, while 40% of tenants who moved home in London last year chose to leave the capital, data from Hamptons shows.

Rental growth in January was the sixth strongest month for annual rental growth since the estate agent began its Monthly Lettings Index in 2014.

The Midlands and North of England notched up the highest rises at 11.2% and 11.0%, respectively. Rents lifted in every region across the country.

In the capital, tenant costs eased slightly to 9.1% as inner London rents “completed their catchup to pandemic levels, slowing the headline rate of growth across the city as a whole”.

For the seventh month running, rents in one-bed homes grew faster than larger homes as the hangover from Covid-19 continues to unwind, the report says.

Both one- and two-bed homes posted faster annual growth in January than in any month since the index began nine years ago.

In November 2021, the average four-bed rent peaked at 126% more than the average one-bed, the study points out.

But this gap has since closed on the back of the average rent for one-bed rent rising 11.3% over the last year compared to 2.7% for four-beds.

This leaves the average four-bed home costing 108% more than the average one-bed in January, still slightly above the long-term average of around 100%.

The report also points out that around 90,370 households, or 40%, of renters who moved in London over the last year, chose to leave the capital, driven by the “rapid recovery in London rents post-Covid”. This figure is up from 28% a year ago.

The 90,370 tenants who left London last year compares to 62,210 homeowners who left the capital.

“This marks a return to form and a reversal of 2021 when more homeowners than renters left during a single year for the only time during the last decade,” the survey adds.

Areas that bordered London became home to renters moving out of the city last year, with Tandridge, Epping Forest and Sevenoaks topping the list.

Although, 38% of former London renters headed to the Midlands or the North of England, up from just 27% in 2019.

The report says: “Leavers increasingly keep their job in the capital while working remotely or commuting back occasionally. Instead, tenants are leaving to make their rent go further and renting larger homes in nicer neighbourhoods.”

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Hamptons head of research Aneisha Beveridge says: “While house price growth continues to slow, rents show few signs of deviating from their upward trajectory.

“The number of homes coming onto the market remains well below pre-Covid levels, with landlords facing tough decisions as to whether the arithmetic still works if and when mortgage rates expire.

“However, the downward drift in interest rates will bring some relief for those who need to remortgage in 2023.”

She adds: “The rapid recovery of London rents over the last year has left record numbers of tenants looking around for cheaper options.

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“While the commuter belt is often prohibitively expensive for would-be first-time buyers, low yields mean renting remains relatively affordable compared to buying.

“The number of homes on the market here has increased faster than in the capital this year, tempting tenants to cross the M25.

“We expect the number of renters leaving the capital to continue rising for the foreseeable future. London leavers are generally in their mid to late 30s, seeking more space for a family or simply for a quieter life.

“But as younger generations are less likely to own their own home, leavers are increasingly likely to be renters rather than homeowners.”

By Roger Baird

Source: Mortgage Strategy

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London rental properties letting within minutes

One lettings agency in London says that tenant demand is so great in the capital for rental properties that many homes are being let within minutes of becoming available.

Benham and Reeves point to demand created by the return of professionals and international students, along with the growing shortage of available properties to rent, for creating a ‘challenging market’.

Tenant enquiry levels have continued to increase over the summer, across the firm’s 19 branches.

They say this is the ‘Most competitive London rental market that we have ever known’.

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Many branches have had almost no stock
In addition, tenants are finding that many branches have had almost no stock available, at best one or two apartments available to rent.

In a market update, the agent says: “Many properties are renting within hours – and some within minutes – as applicants immediately make an enquiry as soon as a property goes live on our website.

“This is swiftly followed by a full asking rent offer and once agreed, a holding deposit – so anxious are they to secure a property.

“This of course is great news for buy-to-let investors who, in many parts of the capital, are seeing their rental properties let immediately with voids at an absolute minimum. Sometimes just a day or two.”

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London is now a ‘landlord’s market’
The update also makes clear that the imbalance between supply and demand means that London is now a ‘landlord’s market’ with property investors expanding their property portfolios.

And rents are rising to pre-pandemic levels – some are now 10% higher.

Investors from overseas are also finding that the weakness of sterling makes London property considerably more affordable, while the shortage of rental properties means demand is the highest that the agent ‘has ever seen’.

Professionals returning to live and work in London, along with international students, are fuelling demand.

In some areas, including the City and east London, around 85% of applicants have been international students.

With the rental market so competitive, tenancy renewals remain at an all-time high – often more than 90% of existing tenants are renewing because they see there is a limited choice of properties available.

Source: Property 118

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Rents rise 1% in most regions in April, says index

Rents in England have continued to increase in April as the market remains buoyant, according to the latest Goodlord Rental Index.

The average cost of rent for a property in England rose from £1,006 to £1,012 in April, an increase of 0.5%.

The index found that all regions saw an increase in prices of up to 1%, with the exception of Northern regions.

The North East saw a larger increase in the cost of rent, with prices up by 2.34%. The North West, however, was the only region to see a drop in the average, with a 1.6% decrease.

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Goodlord’s index also showed that there was another rise in tenant incomes, with the month setting a new record for take-home pay.

As prices continue to creep up, so do salaries, according to Goodlord, reflecting the pressure on employers in a competitive labour market.

In April, the average annual salary of a tenant living in England rose from £29,549 to £30,044, a 1.7% rise, representing another index record.

Renters in London are earning the most, taking home on average £44,920.38, compared to the North West who are the lowest earners, taking home an average of £24,403.69.

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On a yearly basis, renters are now earning 16% more than they did at the same time in 2021.

However, voids rose slightly during the months, as the pace of deals cooled in some regions. The average void period for the country in April increased by three days, up from 16 days to 19.

The biggest shift was seen in the North West, where a rise of 37% was recorded. This was followed by Greater London, which saw voids increase from 11 days to 14, a 27% rise. The index showed that London still has the lowest void periods in the country.

Goodlord chief operating officer Tom Mundy says: “The rental market continues to move apace. Rents are at the top end of what we’d expect for this time of year, but tenant salaries are keeping pace with this rise and continue to break records. And whilst voids have lengthened compared to March, all the signs point to a very buoyant market with a high demand for available housing stock.”

By Becky Bellamy

Source: Mortgage Finance Gazette

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Average monthly rent in England now £993: Goodlord

The average cost of rent across England rose from £985 in December to £993 in January, according to the latest rental index from Goodlord.

Rents climbed to three-month highs at the start of this year, as tenant demand and stock shortages drove prices up past record rental averages seen in October 2021.

Average rents in Greater London now stand at £1,675, meaning they are 126% more expensive than in the North East, which houses the cheapest properties.

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However, the North East had the biggest increase in average rent prices over the month, with a 3% hike. Average costs rose from £716 to £740.

“The pace of the market throughout the winter continues to surpass predictions. Rents are continuing to creep up as tenants compete for the best properties and, as inflation bites, the rising cost of rent is beginning to outstrip salary growth,” says Goodlord chief operating officer Tom Mundy.

The speed at which properties changed hands, however, decreased slightly over the month from December, according to the lettings platform.

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The average void period in England rose slightly from 18 days in December to 20 days in January.

“We wouldn’t expect to see record-breaking low voids during January, particularly in light of the huge market activity seen in December, so the small increase in void averages we’re seeing this month isn’t unexpected,” adds Mundy.

According to Mundy, UK landlord optimism, despite being on the rise, could take a substantial hit as tenants struggle to pay bills over the course of 2022.

“The overall market picture is still very strong compared to 2021. Landlords won’t be struggling to find tenants over the coming months but the rising cost of living may start to affect certain regions sooner rather than later.”

Source: Mortgage Finance Gazette

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Rental costs rocket as demand outstrips supply, finds Zoopla

Annual rental growth reached the highest level for 13 years at 4.6% in the third quarter, according to the latest index from Zoopla.

Across the UK, rents hit an average of £968 in the three months to the end of September as demand from tenants outstripped the supply of available properties.

When London is excluded, average rental growth across the rest of the UK was 6%, with demand doubling in central Leeds, Manchester and Edinburgh and London from Q1 to Q3.

Rental growth at or near a 10-year high across most UK regions – except for in London and Scotland.

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London’s rents have returned to positive territory after falling for 15 consecutive months, with an increase of 4.7% between June and September as offices reopened and workers returned to the city.

However, London rents are still 5% lower than they were at the start of the pandemic.

Zoopla forecasts that the undersupply of rental properties across the country and the strength of the employment market will support rental growth into 2022.

It expects that across the UK, but excluding London, rents will rise by 4.5% by the end of next year.

Meanwhile, London rental growth is expected to pick up to 3.5%, with rents ultimately exceeding pre-pandemic levels.

Zoopla says that the shortage of rental properties has been compounded by both long-term structural issues such as landlords leaving the market following tax changes as well as short-term issues with a surge in demand when lockdown ended.

Rental growth is also explained in part by tenant demand moving up the price bands in the so-called “race for space”, which has not been restricted to the sales market.

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UK monthly rents now account for 37% of an average income for a single tenant occupant.

However, even with strong rental growth, affordability remains in line with the five-year average.

The regions registering the highest levels of rental growth are among those that are the most affordable when compared to the UK average, which has allowed more headroom for increases.

The South West saw the biggest annual increases at 9%, followed by Wales at 7.7% and the East Midlands at 6.9%.

In many of the UK’s largest cities, annual rental growth is running well ahead of the five-year average rate of growth.

Bristol leads with 8.4% growth, followed by Nottingham at 8.3%, and Glasgow at 7.2%.

Zoopla head of research Gráinne Gilmore says: “The swing back of demand into city centres, including London, has underpinned another rise in rents in Q3, especially as the supply of rental property remains tight.

“Households looking for the flexibility of rental accomodation, especially students and city workers, are back in the market after consecutive lockdowns affected demand levels in major cities.

“Meanwhile, just as in the sales market, there is still a cohort of renters looking for properties offering more space, or a more rural or coastal location.”

By Leah Milner

Source: Mortgage Finance Gazette

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Annual rental income growth greater in outer city areas

While an inner city rental property still has a higher monthly rental income, rental homes in outer city areas have seen stronger growth over the past year, according to Sequre Property Investment.

On average across London, Manchester and Birmingham, the monthly cost of renting within an inner city area is £1,152 versus £908 per month in the outer city market, a difference of 27% or £244 per month.

London was home to the biggest difference, with rents across the inner city rental market coming in 37% higher on average, with a 26% difference in Manchester and a 9% difference in Birmingham.

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However, on average across all three cities, annual rental growth across outer city areas has remained largely flat, while across inner city rental areas it has fallen by 4.4% in the last 12 months.

Manchester has seen the strongest performance, with inner city rental values remaining largely unchanged in the last year, while across the city’s outer rental market values have climbed by 3.7%.

In Birmingham, outer city rental values are up 2.2% versus a marginal 0.3% uplift across the inner city.

And in London, there has been a 1.1% increase in rental values across outer city areas and a 7.8% drop across the capital’s inner city areas.

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Daniel Jackson, sales director at Sequre Property Investment, said: “It’s clear inner city rental markets are still struggling due to the decline in demand caused by the pandemic, despite a gradual return to normality from a social standpoint and with regard to the workplace.

“This is particularly evident across the London market, where rental values have plummeted across inner city areas, while they’ve also struggled in outer city areas.

“The good news is that elsewhere, outer city rental values are on the up, with both Manchester and Birmingham seeing very healthy levels of growth.

“This suggests that tenants are now starting to make their return and this is a trend that should soon reach our city centres and help boost values across inner city rental markets.”

By Jake Carter

Source: Mortgage Introducer

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Rental demand in cities up 9.9% in Q3

Rental demand has risen 9.9% in Q3 across the UK’s major cities, according to research estate and lettings agent Barrows and Forrester.

The analysis of 23 major UK cities found that rental demand averaged 42.9% during the third quarter of this year, a 9.9% increase on the previous quarter and 6.8% higher than this time last year.

Cardiff and Glasgow saw the largest quarterly uplift, with rental demand climbing by 22.1% in both cities.

Bristol (21.9%) and Edinburgh (21.5%) also saw tenant demand lift by more than 20% in Q3, with Cambridge completing the top five (19.6%).

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Other cities to make the top 10 included Manchester (14.8%), Newcastle (11.2%), Southampton (10.9%), Plymouth (10.8%) and Birmingham (10.5%).

Newport was the only city to have seen a decline in demand in Q3, down 5.2% on the previous quarter.

Five cities saw demand in Q3 drop below the levels seen this time last year: Belfast (40.9%); Nottingham (3.5%); Portsmouth (3.3%); Liverpool (2.9%); and Plymouth (0.4%).

James Forrester, managing director of Barrows and Forrester, said: “There have been numerous indicators of late that the UK rental market is starting to once again find its feet after one of the most difficult periods in recent times.

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“The demand for city rental homes, in particular, was heavily impacted during the pandemic and as a result, many landlords were forced to stomach a significant decrease in rental income in order to secure a tenant.

“However, this is starting to change and we’re seeing a notable uplift in demand for rental properties across many of the nation’s major cities.

“We expect to see a further boost over the coming months as many tenants look to secure a property ahead of the new year and a fresh start.”

By Jake Carter

Source: Mortgage Introducer

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Goodlord: Average rental cost reaches a year-to-date high

The average cost to a rent a property has reached a year-to-date high of £1,104, according to the latest Rental Index from Goodlord.

Overall, rents in September were found to be 6.94% higher than in September 2020.

The North West has seen a significant increase in the average cost of a rental property, with prices rising by 11% – from £807 to £901.

London also recorded a 2.5% increase, taking the cost of a rental property in London from £1,725 to £1,770. The West Midlands recorded a 1.5% rise.

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However, the East Midlands, North East, South East and South West all recorded decreases in the cost of rent, ranging from 1% to 5%.

After five months of diminishing void averages across England, September saw an end to this trend.

There were increases in void periods in all regions monitored, with the exception of Greater London.

However, the average void period across England is still only 17 days, lower than the averages recorded between January and May of this year.

Overall, void periods remain 10.5% lower year on year.

The biggest jumps were seen in the North East and the North West. The North East recorded a 37.5% increase in the average void period, moving from eight days in August to 11 days in September.

Despite this, the region continues to have the lowest void periods overall, a title it has held for three consecutive months.

The North West saw voids increase by 38%, taking averages from 18 days to 25 days. This makes it the region with the highest overall void periods.

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Greater London saw void periods reduce from 13 days to 12, the only reduction recorded.

The average income of an English renter also rose during September. Salaries jumped up from an average of £25,264 in August to £26,764 last month – an increase of 5.9%.

The average age of an English renter has also increased, rising to 34 years old. This compares to the average renter in August, who was 32.

Tom Mundy, chief operating officer at Goodlord, said: “The year on year trends for the rental market are hugely encouraging.

“The void and rental averages in September 2021 compared to last year show just how strongly the market has rebounded.

“Rents are currently very high, on average, and void statistics continue to be lower than we’d expect, which sets the market in very good stead ahead of the winter months.”

By Jake Carter

Source: Mortgage Introducer

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Renters return: London rental market makes up 4.3 per cent of city GDP

Around £21.4bn is generated in rental income in London alone, which equates to some 4.3 per cent of the city’s GDP according to new research.

The research, from Sequre Property Investment, found that – unsurprisingly – the capital topped the list as the region with the highest rents and the most privately rented homes.

Across the UK, the average tenant pays £12,636 in rent each year, equating to total rental income in excess of £69.4bn across the 2.2m privately rented homes, worth 3.2 per cent of the country’s total GDP.

The figure could have been higher had landlords not dragged rent prices down to entice people back to the capital after pandemic restrictions led to an exodus.

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“Pre-pandemic, at the beginning of 2019, the rental market was in a very strong position. The demand was strong. There was probably a shortage of good stock, so demand was slightly outweighing supply,” Richard Davies told City A.M.

When the pandemic hit, the market was “flooded with properties” as people drifted to grassier pastures.

Which led to more short-let properties going into long-term market, as AirBnB owners turned their holiday properties into homes as tourists and travellers dried up.

Tenants were also found to be agreeing to longer contracts, as to lock in with lower, pandemic-era prices.

Though rents appear to be rebalancing at pre-pandemic levels, Davies explained, rental supply is still reduced.

Since the third quarter of this year, rents have begun to climb again and are back up to 2019 levels and in some areas, maybe slightly higher, he said.

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Davies expects the trend to continue through to end of the year, which he says is ”great news for landlords” after a particularly tough year.

The director of London-based estate agent, Benham and Reeves, Marc von Grundherr agreed, as easing restrictions have given way to an influx of demand for city life once again.

“London remains the beating heart of the private rental sector both in terms of the sheer number of rental properties and the income generated from them,” he said.

“The end of lockdown restrictions and a return to the workplace have already rejuvenated demand and we expect the market to be firing on all cylinders before the year is out.”

By Millie Turner

Source: City AM

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