With the new academic year underway, the rental market is experiencing a seasonal peak, characterised by increased rental demand, low void periods and many renters looking to renew.
Nicky Stevenson, Managing Director of Fine & Country, points to recent data from HomeLet, which shows that the average monthly rent in the UK soared to £1,261 in August 2023, representing a substantial 10.3% year-on-year increase. She notes that this surge can be attributed to the traditional rise in student demand at this time of year, along with other economic factors which are impacting the market.
She adds that although voids periods have increased, they are still comparatively low. “While Goodlord’s data indicates a slight increase in void periods from nine days in July to thirteen days in August, it is important to note that despite this uptick, August still marked the second-lowest month for voids since July 2022,” Stevenson comments.
According to Stevenson, during July the number of prospective new tenants surged by 38% compared to the same period the previous year. However, the supply of rental properties per branch only increased by 24%, creating a growing mismatch between supply and demand in the market. “Consequently, more than three-quarters of agents, as reported in the Dataloft Inform Poll of Subscribers, have noted an increase in renters seeking lease renewals, with just 5% reporting a decrease,” she says.
Looking at trends within the rental market, Stevenson notes that there have been many landlords who have been reducing their portfolios. “According to CBRE data, since 2016, approximately 400,000 rental homes have been sold by landlords, with 126,500 of these sales occurring since the beginning of 2022. The reasons behind this shift include policy changes, increasing taxation, rising inflation, and mounting mortgage costs, all of which have reduced the financial viability of buy-to-let properties. Many landlords are looking to exit the market,” Stevenson comments.
“However, for those considering a medium-to-long-term investment strategy, the current market conditions offer optimism. Softening sales prices and a downward trend in mortgage rates, coupled with steadily rising rents, continue to provide attractive returns and capital growth prospects for investors. Money.co.uk reports that an estimated 41% of landlords own all of their properties outright, while 35% hold all their properties on a mortgage. Those without a mortgage or with lower loan-to-values are in a particularly strong position to capitalise on the current market dynamics,” adds Stevenson.
In conclusion, the September 2023 lettings market in the UK is experiencing heightened demand, low void periods, and a growing interest in lease renewals. While landlords have faced challenges in recent years, the potential for medium-to-long-term investment remains robust.