"Until more is done to encourage landlords back to the market, it seems unlikely to change for the better"
The impact of the UK's chronic shortage of rental homes has been highlighted once more, as the latest Buy-to-Let Rental Barometer shows rising yields in every region of England and Wales over the past year. Published by Fleet Mortgages, the Q1 2023 increase in rental yields to 6.5% reflects the combined impact of a lack of stock in the rental sector and heightened tenant demand.
The high level of demand is in part due to first-time buyers remaining in the rental sector. Figures from Nationwide show that UK house prices fell at their fastest annual rate since 2009 in the year to March, dropping by 3.1%. However, Rightmove reports that the asking price for first-time buyer properties (defined as a flat or house with up to two bedrooms) has just hit a new record high, or £224,963.
Given that mortgages have become more expensive in recent months, it is perhaps unsurprising that a recent Uswitch survey of 2,000 renters found that 49% would need house prices to fall by between 11% and 20% before they could afford to buy, while 13% would need prices to drop even more.
All of this is putting pressure on the rental sector at a time when landlords are exiting en masse. Tory MP Bob Blackman warns that “Many private sector landlords are leaving the market because it is no longer as profitable as it once was.”
The Bank of England, in an early 2023 Monetary Policy Report, advises that, “Contacts attributed this to a combination of factors including tax and regulation, higher maintenance and borrowing costs, and an inability to recoup increased costs in rents.”
All of this is bad news for landlords and renters alike, with the situation creating greater inequality in the private rented sector, according to UK rental guarantor service Housing Hand.
Graham Hayward, Chief Operating Officer, Housing Hand, comments:
“The current state of the UK rental sector does much to favour wealthier renters, who can easily access large deposits and sail through referencing requirements. For those who cannot complete referencing as smoothly, the situation is increasingly difficult. And until more is done to encourage landlords back to the market, it seems unlikely to change for the better. Landlords are a vital part of the housing mix in this country, yet nothing is being done to encourage a rise in their numbers.
“Faster, easier referencing and pay-monthly guarantor services can help to make renting more accessible and affordable. Our goal is to reassure both renters and landlords that they can enjoy a smoother, better rental experience.”
