High mortgage mortgage costs, along with tax and legislative changes continue to put pressure on landlords, pushing many to sell up, and this is having an adverse impact impact on rental supply levels across the country.
New data from Zoopla shows that an average of 21 people are now competing for every rental property – more than twice the pre pandemic average – as supply remains a major problem for renters’, pushing rents higher in the process.
The number of homes for rent is still 24% below pre-pandemic average compounded by stalled new investment by private landlords, and there are widespread concerns that a possible tax changes in the Autumn Budget next month could result in further landlord sales
Zoopla’s latest Rental Market Report also reveals that rental growth for new lets currently stands at 5.4%, half the rate compared to a year ago but still higher than the growth in average earnings (5.1%). Average rents stand at £1,245 per month in July 2024, £63 per month higher than a year ago.
A lack of supply remains a major challenge for renters due to low levels of new investment by private landlords. The number of homes for rent is up by almost a fifth on last year off a low base, but the number of homes for rent is 24% below the pre-pandemic average.
Risk of budget tax changes compounding supply problems
A lack of new investment in private rented homes has created a scarcity of homes for rent, compounding the strong growth in rents over the last 3 years (+30%). Increasing the supply of homes for rent is essential to help to alleviate the scale of rent rises in the face of sustained demand.
Zoopla’s data shows a steady flow of landlords selling homes since 2016. More than one in 10 homes for sale on Zoopla (12.5% in July) were formerly rented. Higher mortgage rates have acted as an additional catalyst for landlord sales over the last two years on top of tax and regulatory changes dating back to 2016.
The government’s new proposals for rental reforms as set out in the Renters Rights Bill, are already factored into many landlord decisions on whether to exit or remain in the market. However, speculation over tax changes in the autumn budget that might impact landlords, may well result in an increase in sales of rented homes, further eroding supply for renters and pushing rents higher.
The lead time to complete a property sale runs to over 20 weeks which means it is too late to start now in the hope of completing before the Budget. However, a delay in any changes to taxation that impact landlords could result in more landlord sales in the short term.
Rents rise the most in affordable areas adjacent to large cities
The slowdown in UK rental growth is being driven by much lower growth in London (2.5%) and a slowdown in other major UK cities (5.8%). Rents are rising at an above average level across much of the rest of the UK, covering smaller cities and towns where rental costs are lower and offer better value for money. Some of the fastest rent rises are in affordable areas adjacent to these larger cities with six postal areas registering 10% or above annual rental growth.
Table 1: Areas in the UK experiencing 10 per cent plus rent inflation
| Country | Postal Area | Annual growth | Average rent pcm | Closest City | Annual growth | Average rent pcm |
| Scotland | Kilmarnock (KA) | 13 % | £608 | Glasgow | 5.3 % | £965 |
| Kirkcaldy (KY) | 12 % | £708 | Edinburgh | 7.3 % | £1,323 | |
| England | Wolverhampton (WV) | 12 % | £871 | Birmingham | 5.7 % | £958 |
| Oldham (OL) | 11 % | £851 | Manchester | 6.3 % | £1,088 | |
| Darlington (DL) | 10 % | £597 | Middlesbrough | 7.8 % | £635 | |
| Walsall (WS) | 10 % | £873 | Birmingham | 5.7 % | £958 |
Source: Zoopla Rent Index, July 2024
In Scotland, Kilmarnock (13%) and Kirkaldy (12%) have recorded the highest increase in rents which are well below (25-35%) the average rent in Glasgow. Rent controls in Scotland have also played a role exacerbating rent rises.
Across England, rents have continued to rise quickly in Wolverhampton (12%), Oldham (11%), Darlington (10%) and Walsall (10%), all areas adjacent to large cities with higher renters or well connected for transport and access to cities further afield.
Supply/demand imbalance to remain into 2025
The demand for rented housing has slowed as one off pandemic factors start to fade and lower mortgage rates help some renters buy their first home. Changes to visa rules appear likely to reduce migration for study and work. Despite a softening labour market, rental demand is likely to run at above average levels for the remainder of 2024, with rents expected to be 3 to 4% higher by the end of 2024.
The unaffordability of homeownership will continue to support demand for renting, especially across southern England where a significant number of workers can not afford to buy. A lack of meaningful growth in the supply of affordable housing means the private rented sector will continue to meet demand from those on lower incomes, further adding to overall demand.
Richard Donnell, executive director at Zoopla, said: “The slowdown in rental inflation is being drawn out by a lack of homes for rent and continued strong demand, driven by the unaffordability of home ownership. Rental inflation is slowing in some major cities where rents are high but they are still increasing quickly in more affordable areas.
“Any new policy or tax changes that result in a reduction in supply will simply push rents higher hitting low incomes renters hardest. It is essential policy makers focus on growing the stock of homes for rent as the primary route to slowing rental inflation and improving choice for renters. As things stand the growing unaffordability of renting is the only route to slower increases in rents.”
Reflecting on the latest Zoopla rental report, Nathan Emerson, CEO of Propertymark, commented: “The rental market has been suffering from a lack of supply against an ever-growing demand for a concerningly long period of time. The housing sector continues to see issues escalate year on year and the real-world effects is that renters face an increasing challenge to secure a suitable property for their needs.
“With tax changes and additional liabilities being imposed on many landlords, plus increases to the general cost of living and mortgage repayments this places extreme pressure on operational costs. This, put against a backdrop of the Renters’ Rights Bill introduction, has the potential to add further uncertainty to the mix for current and prospective investors and contribute to worsening already worryingly low supply levels.
“It is important that any new legislation is introduced with a balanced and fair approach for all parties involved to help encourage long-term investment in providing high-quality housing in areas that desperately need it.”
Tom Bill, head of UK residential research at Knight Frank, added: “Ensuring tenants feel more secure in rented property is a welcome idea but unless new legislation is introduced in a considered way, there may be unintended consequences. If enough landlords decide the new rules are too punitive and sell, a lower supply of rental property will lead to higher rents, which would be bad news for tenants.”
BTL landlords ‘spooked’ by Renters’ Rights Bill and rumoured CGT
Almost like govt and shelter etc don’t know what its like to run a business in the real world.
They act like any one in ‘ business’ has limitless funds, is evil and has a 10 man legal department.
Shambles of a populist anti business country.
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For a yearly income of £73m all they (shelter) provide is lobbying and a hotline…nice work if you can get it!
I imagine the admin of the charity shops is more administrative than the tenant/government advice.
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Well done Shelter – Crisis all you so called organisations that campaign for lower rents, trying to protect tenants and Labour too, well done *applause. Ignorant tunnel vision, no thought to the implications. Out to stop greedy Landlords benefitting from a service that the government has failed on whilst there is an absolute failure in providing affordable homes to rent. Disgusting! These people haven’t taken note of professionals advice (Propertymark), they have little commercial skills and have absolutely screwed the tenants through the back door. I have a huge degree of sympathy for tenants. I live in a four bedroom semi-detached house in a sought after suburban area, mortgage £1600. Tenants paying £1300pcm for a one bed and 1600pcm for a two bed flat. How can that be fair? Not sure how people afford it. So many people suffering. Still have Landlords every month asking us to issue Section 21’s because they want to get out. Buy to let investors? Gosh a long way back since we come across one of those. This won’t recover for a long long time it is an absolute crisis.
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How many more reports like this have to come out before someone realises that the Landlords are not horrible people and that this endless intervention and landlord bashing is making a bad situation worse. I am amazed that more have not left. The situation for tenants gets worse all the time. We run a book of about 450 properties, given conversations with landlords and their thoughts we predict we could be down to around 350 in 12/18 months. Most of our stock are family houses for medium term tenants ( 2/4 years). All the build to rent schemes around us are flats and not the stock we need for rental, no good for a family of 3/4 with a pet.
As for Section 21 is a complete red herring, we have not served one for years. Not one of our landlords has wanted to get rid of a good tenant! I heard on radio 5 live the other day from a spokesperson for Shelter(I think) insinuating that 800,000 thousand people had been made homeless by horrible landlords issuing S21 last year. There only about 4.5M rental properties in the UK!
Landlords are business they need to make money, they are not charities and Westminster, Shelter etc need to appreciate this.
I am off out to see 2 more properties today that are currently let to value and prepare to sell. I have to give more lovely news to 2 families in the next week or so that they will have to move. Where to?
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Concur over 50% of my landlords want to sell.
I am imagine no lettings business in the next 5 years as all the private landlords have gone.
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Once again Labour are using a sledge hammer to crack a walnut. The Labour run Welsh Assembly Government did the same thing and their Renting Homes (Wales) 2016 Act has driven many landlords with one or two properties out of the sector. The RHW occupational contracts are much more complex and run to about 38 pages, but they do retain a “no fault eviction clause” (like S.21 HA) but it is for 6 months, rather than 2 months.
Before this new legislation came in we only used S.21 if a landlord wanted to sell up, or if we had a tenant who was consistently slow paying, etc, because we could move them on – without having to use the courts and the tenant was better off because they didn’t have a CCJ.
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I love it.
This is what the young woke generation and teachers and council workers voted for
now they can suck it all up.
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There’s so little satisfaction in We Told You So to the activists of Gen Rent and S#lter, who house nobody, where homes are concerned.
Would restoring the system before Finance Act #24 restore confidence and make good the stress and losses?
No, not really. We won’t be back.
UK is mainly a service economy so providing a housing service is a business not a hobby. Aspiration to do that well has been crushed so Renters will bare the cost of what is left, including that there is nothing available and at a cost that can be afforded. Flexible labour is in the national interest but will struggle without homes..
After a two term labour administration we won’t be able to invest, even if we want to..
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Two term Labour administration? You must be joking. The country will be lucky to survive one.
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Agreed.
I am meeting so many people planning to leave the UK. I might have left by then too.
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