Conventional wisdom has it that when house sales soar, the rental market eases, and vice versa. But, as with so much these days, things are changing.
The sales market is certainly strong. This spring we’ve seen people queuing all night outside an estate agency waiting for homes to go on sale, while average asking prices have hit an all time high.
But the rental market, too, is extremely strong. Rents outside London are up eight per cent in the past year says letting agency Hamptons, while property website Home reports some locations in overdrive – rents in the south west, for example, are up 12.6 per cent since spring 2020.
Indeed, in one Cornwall hotspot a lettings agent says there’s a “tidal wave” of enquiries within minutes of her posting any new property available to rent on her company website.
This is tough indeed for prospective renters and begs the obvious question: why?
The tax and Covid combination
Hamptons says that since the start of the pandemic there have been 300,000 fewer rental properties available to tenants than 15 months ago. In some cases this is because landlords have sold up, simply to take advantage of higher prices being paid by buyers.
Another reason is that several years of increased taxation and stricter rental regulation have made buy to let investment less attractive – this is a long-term government plan to make more properties available to first time buyers rather than to landlords.
The irony, however, is that fewer homes to let mean more renters are chasing fewer properties – and so rents rise, making it harder for people to save up deposits in order to buy.
Add to all this one other factor. Many existing tenants – who would normally switch to a different property or might have saved enough to buy – have instead stayed put because they now work from home, or are worried about finances as the pandemic continues, creating a lower turnover.
Demand on the rise
This reduction in supply of homes to rent comes as demand is actually rising – not least from younger people priced out of buying their first home by increasing prices.
In March, the latest figures, the number of new prospective tenants registering with each letting agency rose to an average 84: in January it was just 75.
Unusually, this high demand is most extreme in the south west and northern England – it’s thought that some from the south east and London are ‘trying out’ lifestyles elsewhere during a period when they are working from home and so do not have to commute.
The one exception
Conspicuous by its absence is London, where the situation is completely the reverse.
New figures from Rightmove, having analysed tens of thousands of rental properties, show 65 per cent of London locations now with lower rent levels than five years ago.
Most of this fall has happened in the past year as a lack of international travel meant Airbnb-style homes had no takers, with owners instead switching the properties to the long-term rental market. This in turn created a glut and sharp falls in rents – some agents report central London rental properties are now 30 per cent cheaper than a year ago.
The market will swing again, experts predict, once more people resume office working and overseas travel bring Airbnb renters back into London and other big cities. Until then, it’s generally good news for landlords who have the whip hand – but it’s undeniably challenging for tenants faced with higher rents across most of the country.