Letting agents have reported a 24% increase in the number of new tenants on their books from a year ago, according to Propertymark. In April 2023, the average number of new tenants per branch was 118, up from 64 in December.
The news is not good for renters vying for rental properties, which have not increased in availability. On average, there are now 16 tenants for every property on the market.
When the buy to let mortgage was first introduced in 2002, it facilitated a huge rise in privately rented homes. The number doubled by 2015, and in 2021 stood at 5.5 million homes in the UK. However, landlords as well as households are under pressure from rising costs, and rental prices increased by an average 9.1% in the year to May 2023, according to Hamptons, down from 11.1% in April. The only region where rental growth did not slow was the south west of England.
There are several factors in the increase in new tenants fighting for the same number of properties.
Social housing tenants
Social housing has traditionally been the answer to finding low cost housing but the number of homes available is diminishing. Last year alone, 29,000 social housing homes were either sold or demolished and fewer than 7,000 built in their place, according to homeless charity Shelter. The Housing communities and local government committee suggests that 90,000 social houses need to be built every year to keep up with demand.
Private rented houses are the only alternative for many households, with their income topped up by housing benefit (Local Housing Allowance). Over £23 billion is expected to be spent by the government this year on housing benefit.
Students
Visa rules will be changed from 2024, to allow only postgraduate research students to bring in family members. Before the changes, in 2021-22 almost 680,000 international students came to the UK, an increase of 12% over two years.
The new rules over fixed term tenancies have caused concern among landlords who fear that not being able to replace students before the start of term will cause periods with no income from their property portfolio.
The competition for purpose-built student accommodation is high, with three students for every available bed. Those unable to secure student accommodation must turn to private landlords for a home. The demand is such that queues have formed outside letting agencies, and some universities have been forced to house students in other nearby towns and cities or even hotels.
The stamp duty surcharges for overseas buyers and second home owners has further exacerbated the problem. The cost of paying rent over two years is as much as many overseas or second home owners would pay in taxes when buying property.
Net migration
At 606,000, net migration reached records levels this year. Immigrants are far more likely to require rental accommodation while they save for the deposit on a property. That figure is also increasing, with the average two year fixed rate 95% LTV mortgage up last week to 6.22%.
New renters
The younger generation has found it increasingly more difficult to move from the family home, with first time renter numbers dwindling to 43,280 this year (4.6% of new tenants) from 71,860 (6.1%) in 2015.
Affordability is improving, with the average 18-24 year old now spending 43% of their income on rent, down from 49% in 2015. During this time salaries have risen by 42%, while the average single room rent has increased by 26%.
Now that the average rent has surpassed £1,000 a month, those staying at home rent-free could save over £12,000 a year – a cumulative £1.3 billion in 2023, and money that might be put towards buying a house in the future.
Getting on the property ladder this year? Ask your local Property Surveying Chartered Surveyor for advice on purchasing new property.