9:38 AM, 29th March 2023, About 2 years ago 4
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The latest rental market report from Zoopla offers tenants little hope that rents will begin falling any time soon – as landlords ‘rationalise their portfolios’ or leave the market altogether.
Zoopla says that rent inflation in March has slowed to 11.1% – down from the high of 12.3% that was recorded in the middle of last year.
The property platform says that a strong labour market and record immigration have pushed up demand in the private rented sector (PRS) – but rented home supply has grown by just 1% since 2016.
Also, the higher mortgage rates facing landlords have undermined the economics of property investment, which has led to a drop in new rental supply.
Zoopla also warns that landlords who are ‘searching for yield’ to offset their rising costs will be moving into more lucrative areas of the PRS in the search of profits.
There will be limited growth in rental supply this year, while tenant demand will remain above average but lower than last year.
Also, rent rise for new lets will drop to 4-5% by the end of this year – and will be felt quicker for landlords in London and other city centres.
Richard Donnell, Zoopla’s executive director of research, said: “With a third fewer homes available for rent than normal, demand per available rental home spiked even higher last year by 250% above the five-year average.
“Demand for rented homes remains 10% higher than this time last year.
“Rents will continue to rise ahead of incomes unless we see a sustained increase in rental supply or a material weakening in demand, both of which appear unlikely at this stage.”
He added: “In simple terms, a static supply of rented housing means new investment that adds to supply is offset by property leaving the sector, as landlords dispose of rented homes as part of ongoing portfolio rationalisation or exit the rental market altogether.”
Zoopla has also seen a slowdown in landlord property sales because of the weaker sales market.
Around 11% of homes listed for sale in early 2023 were formerly rented – a fall from 13% on sale last year but levels remain above average.
Mr Donnell said: “Tax changes, growing regulation and higher borrowing costs are leading many private landlords to review their portfolios and the pros and cons of investing in housing.
“The economics of being a private landlord has changed.
“The equity needed to buy new rented homes with a mortgage has been increasing in recent years as a result of rising house prices, lower rental yields and tighter lending criteria.”
He adds: “This has been exacerbated over the last six months by rising mortgage rates.”
Commenting on the Zoopla report, Richard Rowntree, Paragon Bank’s managing director of mortgages, said: “Tenant demand shows no sign of abating and remains at 51% above the five-year average.
“With Zoopla’s analysis showing only a 1% increase in private rental housing supply over the past seven years, the chronic supply/demand imbalance we see today will only worsen unless the stock of rented homes increases.
“This is clearly something the current Government, or the next, will need to consider as it develops housing strategy.”
He added: “Landlords are an important element of the housing mix and should be incentivised to maintain or grow their property portfolios through a fair and proportionate regulatory and fiscal regime.”
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sean carrington
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Sign Up13:18 PM, 29th March 2023, About 2 years ago
in my town in the south east /it has a population of 40000 approx and as of today when i looked there are 6 propertys for rent / 2 of which have come on today and the other 4 less than a week old with 2 fully booked for viewings
its a vicous circle created by the govt
no investor landlords are going to buy here anymore /
stamp duty at a minumum of £10k plus /
epc grade C propertys only wanted
buy to let rates at 8.25%
capital gains tax relief as near as abolished
not a single council house built that i am aware off in the last 10 years.
i have tennants asking me to buy property for their relatives to rent ,for me to explain that it is not economically viable to buy anything within a 50 miles of me.
yet the govt is insisting on heaping more and more regulation and bills on us landlords.
Downsize Government
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Sign Up15:25 PM, 29th March 2023, About 2 years ago
Reply to the comment left by sean carrington at 29/03/2023 - 13:18
To a child with hammer everything looks like a nail.
Governments tools are regulation and taxes.
Unfortunately landlords are the nails in this case.
There's no rhyme or reason to the hammering.
It doesn't help tenants and it doesn't help landlords. But it seems to make politicians feel better.
Nicholas G-B
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Sign Up12:28 PM, 20th May 2023, About 2 years ago
SafetyLet are rental warranty provider. Based on our, not insubstantial client base, 2.2% of clients gave notice on a Section 21, The reason given being they were selling up. This is since January. This equates to a colossal loss of available rental properties of 5.3% in one year. What I would like to know what plans dose the government have to replace these in the economy. Or are we heading for a monumental housing crisis.
Old Mrs Landlord
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Sign Up13:55 PM, 20th May 2023, About 2 years ago
Reply to the comment left by at 20/05/2023 - 12:28Government plans to replace the properties sold up by unfairly taxed private landlord? Build to Rent of course! That will solve everything. Unfortunately, several planned developments are no longer going ahead and others are paused due to economic factors such as lack of skilled workforce and increases in price and scarcity of materials. Only a few of the most well-paid tenants will be able to afford the rents and not everyone who needs to rent is a young professional who longs to live in an identikit tower block flat in a city. Never fear though, government will rig the system and subsidise these housing providers in return for a few much-needed donations to party coffers. Cynical, moi?