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Market is “unsustainable” with rents too high and supply too low

Today’s rental market is unsustainable according to a leading industry supplier.

HomeLet’s latest monthly market snapshot says the average rent in the UK is now £1,127 per calendar month following a 1.3 per cent rise in the past four weeks. When London is excluded, the average rent in the UK is now £948 pcm. 

Average rents in London continue to rise, to a new average of £1,868 pcm - a 1.2 per cent rise in recent weeks. Meanwhile Scotland saw the largest monthly variance, with rents 3.4 per cent higher than last month

Andy Halstead, HomeLet’s chief executive officer, says:  “This month’s figures paint a picture of a rental market that is struggling to meet the needs of renters or landlords, with spiralling prices a bad sign for both parties.

“One of the main factors leading to rising rent prices is a lack of supply on the market to match demand. This problem could worsen if landlords continue to leave the market, leaving a rapidly shrinking supply of available rental properties. The issue is reflected by the overall findings from our recent Landlord Survey, where 18 per cent of all landlords that we spoke to said that they expect to reduce their portfolio or leave the sector entirely in the near future – this figure rises higher to 22 per cent for landlords based in London.

“The same survey revealed that four out of five renters are worried about how they will pay their rent. A market too volatile for landlords to rely on receiving rents due, and properties too expensive for renters to cope with, is clearly unsustainable.”

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  • George Dawes

    Just wait til the prs disappears and big brother rentals takes over ….

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    Who is big brother? The build to rent people wouldn’t touch the vermin that live in my house.

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    There will be many tenants this winter that won't be able to pay their rent, which is why affordability checks and guarantors are now more important than ever before, a tenant that can't pay is no use to a landlord

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    Lord Harrington is today asking Councils for homes for 10,500 Afghans still living in hotels; 100,000 Ukrainians are going to be trying to find homes in the next 6 months or so; over 1 million Brits waiting for social housing and yet this Govt continues to drive decent LLs out of the PRS!

    Housing market unsustainable? You any seen nothing yet!


    So right Tricia 👍🏻 and we don’t even have s21 or EPC C 😱😱.

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    As interest rates rise and landlords come to the end of their current mortgage fix rents will rise even more. We don't just have to factor in the interest rise but also the extra cost of Section 24. Of course FTBs are also looking at higher interest rates so rent will still remain as affordable as it currently is compared with buying. Or put another way both will be more expensive than they are now.

    The real issues are supply shortages, huge delays in the conveyancing system and general under utilisation of existing housing stock.
    Also the whole bedroom entitlement thing for tenants is questionable if there isn't sufficient housing stock to satisfy the entitlement. When did that idea come into play? Back in the 1950s my mother was a midwife and often used to talk about the families with 13 or 14 children living in 2 or 3 bedroom Council houses. Now those same houses are only deemed adequate for 4 or 6 people. I'm not in favour of overcrowding but I do question the wisdom of having a housing and benefit system that rewards a tenant with a bigger house simply for having another child they can't afford. Homeowners and their children don't have the same bedroom entitlement.


    Supply shortages also arise because of central and local government policies including the following:
    (1) additional licensing schemes which mean that if landlords let a flat to more than two people they have to obtain a license
    (2) a resistance by local authorities to the conversion of large second homes into HMOs because that will change the character of a seaside resort, lead to more anti-social behaviour and also an influx of refugees
    (3) landlords' fear of new legislation which is leading some to leave property empty rather than letting it and/or refurbish it in preparation for sale

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    "The issue is reflected by the overall findings from our recent Landlord Survey, where 18 per cent of all landlords that we spoke to said that they expect to reduce their portfolio or leave the sector entirely in the near future..." - out of interest, what was the full result of this survey? With only 18% looking to reduce it seems likely that the exact opposite to this narrative may be indicated, with possibly a higher percentage looking to increase their portfolio?


    I suspect that a proportion of landlords hope to switch their letting business to a model which will not be covered by the new legislation. Selling would be a second option, but only if there were no other viable options.

    That is what happened before shorthold assured tenancies existed. I remember when the Rent Acts were in force that virtually all landlords sought to circumvent the Rent Acts in one way or another - but the private rental sector was small at that time with many landlords pulling out if they had a vacant rental property.

    Selling is more attractive than it once was because of the very high value of property, particularly in London. Landlords don't want to gamble with losing control of a property worth millions of pounds. However, capital gains tax is a bit of a deterrent to selling for some.


    Mark Birch - They may just stay as they are, not sell and not buy anymore, so the overall effect is an 18% drop in rental properties. Still not good for tenants.


    And a 22% drop in rental supply in London according to that research. Landlords perhaps more likely to sell high value property.

    If a large London property were valued at 2 million pounds and was producing £40,000 a year in rent gross, then that would represent less than a 2% return on the capital value.

    The dividend of some shares is more than 4%- and the money just comes into your bank account without being constantly on call to tenants.

    However, shares have been more likely to lose their value than property, but having a sitting tenant in a property would reduce its value dramatically.

    At the moment, Labour is looking to be more likely to win the 2024 election than the Conservatives, and that could represent an even bigger risk to landlords.

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    I wouldn't consider a 2% return. 9% minimum for me.


    In that case, for you, property is a very good investment.

    Certain areas yield very good returns. I believe one could expect a 10% return in Liverpool.

    The worst area for letting is supposed to be St. Alban's with a 1.95% return.

    London W8 on average produces a 2.05% return and London WC1 produces a 2.28% return on average.

  • John  Bentley

    Is it really worth the hassles for 2 per cent? Ok in a rising property market but what if no capital growth? Must be easier investments out there?


    You've hit the nail on the head there John. It is the capital growth which has made property investment so good up to now in London. However, if rental reform happens as described in the White Paper then many landlords won't be able to live with that, and will prepare to sell. That could mean prices will fall considerably as a great number of large houses and flats in London may come on the market at about the same time.

    You are right, too, that property investment is a difficult investment, but capital gains tax deters some people from selling - and in the past, keeping the property has always been better than selling it. Not sure that that will be true of the future unless inflation is so high that money becomes worthless.


    No 2% isn't worth it, I certainly would not be renting a property out for that return


    That's why so many landlords will sell up in London.

    A low return is OK if the investment is very low risk, but that White paper makes property rental a high risk investment.

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    Ellie - Some very good points 👍🏻 …. And if Labour do get in next 😬 god help us all.


    Thank you Simon. If you had to sell to a sitting tenant at a discount then that would obviously reduce capital value and possibly dramatically so.

    Both the Conservatives and Labour have managed to push landlords to sell fairly quickly now. EPC C and the requirement to file tax returns four times a year are other reasons to get out.


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