Rocketing demand for rental accommodation has prompted the UK’s largest letting agent to call for more incentives to encourage buy-to-let landlords to invest in the market.
According to Countrywide, tenant demand is at a record high, with up to nine tenants competing for properties.The 211 branches had 50,480 new tenants register in the second quarter of this year – a 16% rise on the first quarter. The sharpest increase was in June, with over 18,000 new tenants registering, the highest number in a single month since records began in 2003, and 22% more the previous month.
However, the rise in tenant demand is in sharp contrast to the fall in the number of new properties being offered to rent. They have fallen 6% in the last three months. The excessive level of demand has led to marginal increases in rental prices. As more families turn to renting, four-bedroom properties have seen the highest increase, with the average rent rising to £1,090 per calendar month.
There is now an average of 5.5 tenants vying for each property compared to 4.9 tenants in the first three months of the year. The highest demand is for two-bedroom houses in the South-West where 8.9 tenants competed for each property. This level of demand is having a significant impact on the market, with properties being snapped up on average within two weeks – three days less that in Q1 and six days less in Q4 2009.
John Hards, Countrywide Residential Lettings co-managing director, said: “The number of tenants entering the market is at unprecedented levels – and we have yet to enter the peak season. Student demand for private rental accommodation will increase further with university applications at record levels. “The buy-to-let sector remains a good source of investment. However, the Government needs to do more to incentivise new landlords in order to ease the current shortage of properties. If tenant levels continue to rise at the same rate, this will be further exacerbated.”
A new report from specialist lender Paragon also confirmed the huge growth in tenant demand. Nigel Terrington, Paragon Group chief executive, said: “Tenant demand has been rising consistently for two years and shows no signs of slowing down. Would-be home buyers continue to be unwilling or unable to step on to the property ladder, whilst longer-term social changes, such as greater numbers of single-person households and economic migrants, are also creating more demand for rented property.
“Strong tenant demand is great news for landlords, but will lead to rental inflation for tenants unless the private rented sector is able to expand to meet this demand. Pressure is building on the finite number of properties in the sector, because the lack of buy-to-let mortgage availability has prevented landlords from growing their property portfolios.
“It is clear that confidence is high amongst the landlord community, which is reflected in the greater appetite for investment. There is obviously a dislocation between landlords’ intention to purchase and their actual ability to do so, given the continued scarcity of buy-to-let mortgage finance. Landlords still value residential property as an investment vehicle.”