21 tenants competing for every rental property

Some 21 tenants are competing for every rental property on the market – highlighting the challenge faced by renters, Zoopla’s Rental Market Report has revealed.

There are currently 24% fewer properties on the market compared to the pre-pandemic average.

Rental growth for new lets currently stands at 5.4%, half the rate compared to a year ago but still higher than the growth in average earnings (5.1%).

Rents are rising the most in traditionally affordable areas, as there’s been double digit growth in Kilmarnock (13%) and Kirkcaldy (12%) in Scotland, as well as Wolverhampton (12%), Oldham (11%), Darlington (10%) and Walsall (10%) in England.

Richard Donnell, executive director at Zoopla said: “Rental inflation is slowing in some major cities where rents are high but they are still increasing quickly in more affordable areas.

“Any new policy or tax changes that result in a reduction in supply will simply push rents higher hitting low incomes renters hardest.

“It is essential policy makers focus on growing the stock of homes for rent as the primary route to slowing rental inflation and improving choice for renters. As things stand the growing unaffordability of renting is the only route to slower increases in rents.”

Over one in 10 homes for sale on Zoopla (12.5% in July) were formerly rented.

The loss of mortgage income tax relief, combined with higher mortgage rates, are some of the reasons why so many landlords have opted to sell.

Zoopla warned that a lack of meaningful growth in the supply of affordable housing means the private rented sector will continue to meet demand from those on lower incomes, further adding to overall demand.

Greg Tsuman, director of lettings, Martyn Gerrard, immediate past president of the Association of Residential Lettings Agents (ARLA) Propertymark, said: “I suspect that the rise from 17 would-be tenants for every rental property on the market last month up to 21 today is in part a reaction to the rumoured changes to the Capital Gains Tax as well as the Renters’ Rights Bill, which we’ve now seen for the first time. Whilst the proposals in the Bill itself pose little threat to landlords, it has created a sense of uncertainty, and the reality is that landlords are now looking sell up and get out of the market.

“It therefore remains crucial for the government to do more to keep landlords in the market, and the most impactful thing it could do is to reverse Section 24 of the Finance Act, which prevents landlords from claiming mortgage relief on their rental properties.

“This treatment of landlords is totally different to any other business, as it allows the government to tax landlords even on a loss-making tenancy.

“The effects of this are most acutely felt in London, where the majority of landlords have financing secured against their property.

“As the figures today have shown, all this does is force landlords to sell, creating higher competition for renters and ultimately driving rents up to the extent that the government has to intervene with legislation like the Renters’ Rights Bill.

“The imbalance between support for landlords and tenants is essentially forcing tenants to create bidding wars between themselves.”

He added: “Landlords will have also been spooked by the Bill’s lack of clarity over how they will be able to evict anti-social tenants, those that are repeatedly late on paying rent, and others that are abusing the system, adding the risk that landlords may be stuck with tenants who are not paying rent and incur losses which will ultimately be passed to future tenants through rent increases.

“Overall, I would caution that unless the government introduces policies to balance support for renters with sufficient support for landlords, we will soon see the ratio of renters to rental properties rebound up to the historically high levels we saw in November 2022, when there were 45 hopeful renters for every property available.

“It is telling that in 2017, before the introduction of Section 24 of the Finance Act, this ratio was as low as 3 renters for every property, but that it spiked sharply after Section 24 was introduced.

“We simply must avoid sleepwalking into a catastrophe where renting becomes a privilege of a few whilst others look at similar waiting lists to those seeking social housing, if not sleeping rough or in temporary housing.”

Via @PropertyWire