The supply of rental accommodation has dropped significantly as landlords divest due to increasing regulation.
New research from TwentyEA shows that during 2022, supply volumes reduced by 8% year-on-year and 25% since 2019.
Demand for rental accommodation is also falling, but less than supply, with tenants only able to rent what is available. However, the underlying demand is still strong if the supply is there, because of rising prices. During 2022 demand volumes were 4% down in 2021 and 17% down in 2019.
Available Stock
The overall volume of available lettings stock has been falling since March 2021. In December 2022, available stock was only 199,725 properties. In December 2019, it was 328,412.
Agreed Prices
Stuart Ducker, Strategic Solutions Director of TwentyEA comments: “There is simply too much demand and not enough supply. Average agreed let prices have continued to rise in the medium term with prices up by 8.5% over the last year and 22% up since 2019. If Government legislation on the private rental sector continues, and it looks like it will, expect prices to rise further if incomes rise.
“Available lettings stock has fallen by 39% in just three years. Increasing regulation in the PRS has made many landlords divest. This supply side, pitched against underlying demand for rental properties has created a perfect storm
“Whilst TwentyCi does not issue forecasts to the market, our view is that new lettings instructions will fall by a further 5% on 2022 to 1,121,000. While this is not good news for tenants, it’s great for agents and Landlords, who will continue to see their rents rising in real terms after years of decline.”
I don’t think a rapidly shrinking market is “great for agents”! We need volume not high rents. This makes more sense than the story the other day about the increasing size of the PRS to me anyway.
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If you manage 100 houses with an average rent of £800pcm and an average fee of 10%, thats £8k income per month (£96k per year).
If you manage 50 houses with an average rent of £1,600pcm and an average fee of 10%, thats also £8k income per month (£96 per year), but you need half the staff, making the agency better off.
The number of Landlords is not the only important stat, what also matters is the number of tenants out there pushing up rents (high rents might even intice in more landlords).
I know this is counterintuitive, as every agent is told to “get more landlords” which you should also do, but it just means you can relax a little when you hear stories about how government regualtions are puching landlords out of the sector. Those same regualtions will almost certantly push up rents as a tax on landlords is a tax on tenants.
a lack of tenants, causing rents to fall, (which will push landlords out of the sector) is the thing you should be worried about (that and rent controls).
make sure your rents are always set at the top market rate by doing annual rent reviews and you won’t have a hugh problem. It’s a rollercoaster with ups and downs and yes rollercoasters are scary, but they don’t often crash.
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With the higher number of properties however there are more opportunities for the agent, for example renewal fees to landlords, commission from contractors, insurance. Let’s say an earning opportunity of £200 per landlord per year, dropping the numbers from 100 to 50 means a possible drop in income of £10,000 pa.
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You must have constant supply of stock to stay afloat as a letting agent. Yes rents going up on paper can mean you can afford to loose a few properties, but the danger is you are teetering on the edge of a big void in income if high rent property leaves yours books, then another, another and all of a sudden …… doom and gloom trying to find new stock and a big hit on lost income. I don’t like high priced rents on our books (do have some) without a good stock of middle road rents, which are our lifeline and easier to stay afloat.
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As far as this story goes …. I told you so! This is not new news and it is getting worse now, not may in the future. The future on the current trend is amelt down and many letting agents will go to the wall. You must have stock. You must have stock for the demand.
It is a scandal that short sighted politics has created the mess and misery for all. There needs to be a BIG reverse and help to landlords to stop the rot. Considering they are/have been bailing out all governments, they should be offering incentives to enter the market.
What do we have? Politics from a variety of different organisations, central and local governments, hostile charities who do more harm than good for the people they say they are helping … really!!!!, civil servants personal agendas, other rhetoric form differing departments (e.g. change in EPC’s and the like), blatant high cost licencing/attitudes by some local councils that is nothing more than demonising landlords and latch onto one rogue … paint brushing all landlords being the same! Varied Taxation which frankly is nothing more than … how dare landlords you make money!
There is no central control that is monitoring how all these individuals should be working together or impact on each other, are being destructive to a urgent need to housing supply.
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