A report compiled by Rightmove shows that every rental property advertised has 20 competing requests for viewings. The report, commissioned by the BBC, gives rise to fears that renters are bidding over the odds to secure a property, landing themselves with unpayable bills.
The report says that the average number of requests to see each home has more than tripled from six in 2019. The ‘queue to view’ is even longer in some regions of the UK, reaching 30 in the North West of England.
With rising mortgage rates making buying less affordable, there’s more demand from prospective renters. At the same time, many landlords faced by mortgage, utility and Council Tax increases are selling up and leaving the market.
Landlords say that the government’s repeated changes to tax rules are also making the market sector unprofitable for them, with large corporate landlords left to take up the slack. The planned reduction in capital gains tax (CGT) allowances from April 2024 is prompting a further exodus of landlords, with enquiries reportedly hitting a 13-year high. Plans were announced in November 2022 to change CGT allowances, which means that people disposing of most types of investment assets will pay more CGT from next year. The personal allowance fell from £12,300 to £6,000 in April 2023, and will fall further in April 2024 to £3,000.
The effect is that a couple selling a jointly-owned buy-to-let property, previously allowed a gain of £24,600 before paying any CGT, are now allowed only a £12,000 gain, and a £6,000 gain in 2024.
Build-to-Let
Last year’s ‘mini budget’ and the subsequent meltdown in the mortgage market effectively put an end to soaring property prices and increasing opportunities in the buy-to-let market. Landlords who took out large loans against buy-to-let properties are likely to find themselves having to choose between putting up rents to unaffordable prices, or selling up.
This and changes to regulations on ‘no fault’ eviction are the major reasons for small landlords getting out of the market, and the subsequent shortness in supply of rental properties.
The residential rental market used to be mainly made up of buy-to-lets, which are typically owned by small-scale landlords who have a relatively small number of properties in their portfolios. Build-to-rent, on the other hand, refers to large blocks of housing units owned by institutional investors such as pension or investment funds.
This housing class has grown significantly over the past ten years: by the end of 2022, it accounted for over 240,000 units built or under construction in the UK. Property group Savills predicts that this will increase fivefold over the next decade.
Agents
Meanwhile, anecdotal evidence from estate agents suggests that properties are being let on first viewing, with prospective tenants with children or pets often missing out.
The government has announced plans to ban ‘no-fault’ evictions, but progress on legislation has proved slow, with charities writing to Prime Minister Rishi Sunak to urge him to speed up and strengthen reforms in the private rental sector.
The BBC suggests that there are several ways competing tenants can improve their prospects of landing a rental agreement:
- Start searching well before a tenancy ends
- Sign up with multiple agents
- Have documents such as payslips, a job reference, and a reference from a previous landlord to hand
- Build up a relationship with agents in the local area
- Widen your search area
- Check your budget and make sure you know how much you can afford
- Check social media for ‘sneak peek’ chances to see properties before they are listed
The essential problem remains that there are not enough rental properties to meet demand, with 43 percent fewer properties available in London this year compared to 2019. With landlords hit with increases in expenses too, the inevitable result is an increase in rent payments. Official figures from the Office for National Statistics show that the average rent in England is now £960 per month, the highest for a decade, though of course there are regional variations, with nothing at this price available in London. The BBC reported in one couple paying £2,150 per month – half their combined income – for a one-bedroom flat in London.
See also: Discover Expert Advice from BSL Financial Services to Navigate the Mortgage Market
