Stepping on to the property ladder is set to become even more difficult as demand for rental homes allows landlords to increase rents.

What’s the latest?

The number of properties on the market to rent has fallen to its lowest level for a year.

The average letting agent listed 172 rental properties per branch in January. That’s 10 fewer than in December and the lowest level since the Association of Residential Letting Agents (ARLA) began tracking the data a year ago.

But the number of potential tenants increased slightly during the month, putting further upward pressure on rents.

Why is this happening?

The fact that the UK is building around 100,000 too few homes a year to keep pace with demand is leading to a shortage of homes for those who want to rent, as well as those who want to buy.

At the same time, demand from potential tenants is increasing, as people have to wait for longer before they get onto the property ladder.

David Cox, managing director of ARLA, said: “Supply of housing continues to be a problem and tenants bear the brunt of this with more people competing for properties at higher prices.”

"A fifth of those renting in the UK do not expect to ever be able to afford to buy a home. Unless we act soon to build more properties, this number will only get higher."

Who does it affect?

The shortage of rental homes is bad news for tenants as it enables landlords to raise rents. Three out of 10 letting agents reported rent hikes in January – the highest level since September last year.

Cox said: “The majority of tenants find it impossible to save very much at the end of the month to put towards buying their own home.

“Our recent Cost of Renting report found that a fifth of those renting in the UK do not expect to ever be able to afford to buy a home. Unless we act soon to build more properties, this number will only get higher.”

The limited number of rental homes available also means less choice for tenants, and in some cases, stiff competition to secure a property at all.

Sounds interesting. What’s the background?

There are hopes that the current rental shortage will be alleviated as investors surge to enter the buy-to-let market ahead of the Government’s stamp duty hike for people buying a second property on April 1 this year.

Both the Council of Mortgage Lenders (CML) and the British Bankers’ Association (BBA) have reported an increases in lending to these borrowers.

Just under half of letting agents also reported seeing an uplift in interest from people considering a buy-to-let purchase, double the 24% who reported an increase in December.

But they were less confident about the longer-term impact of the changes, with 63% saying they think the Chancellor’s new 3% stamp duty surcharge will actually push landlords out of the buy-to-let sector, causing supply to drop further.

At the same time, 58% said they thought the higher costs landlords faced would lead to increased rents for tenants.

Top 3 takeaways

  • The number of properties available to rent has fallen to its lowest level for a year.

  • The average letting agent had just 172 properties registered per branch during January, 10 fewer than in December.

  • Three out of 10 letting agents reported seeing rent increases during the month.

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