After a two-month pause, UK rental property has seen a resurgence in tenant demand. But supply is lagging behind, leaving a gap in the market for investment.
Property portal Rightmove last week announced that it experienced its busiest day on record on Wednesday 27th May. More than six million visitors browsed the site, which was also an 18% increase on the same day last year. The data also shows that more than a quarter of people (28%) who’d had no plans to move before lockdown were now on the lookout.
For the sales market, this certainly demonstrates a revival of interest. However, according to Rightmove, the rental market’s recovery has been even more significant than sales. Demand in the sector also didn’t dip quite as low as it did for people looking to buy a new property.
Rental market’s miraculous recovery
The portal registered a huge 22% increase in demand for lettings compared to the same point in 2019. These statistics show that the sector is in fact almost back up to its pre-coronavirus levels in terms of tenants seeking homes.
There are a number of factors influencing this steep rise. One is simply that the housing market is now “unlocked“, meaning people can view properties again and move house. In the private rented sector, with less paperwork and logistics to work out than for sales, such viewings and moves can happen much quicker.
However, according to Rightmove director Miles Shipside, there are many other possible reasons for people’s haste in looking for new rental homes.
“They may need to move for a job,” he said. “In this environment we are in now, there is a need for people with specialist jobs to be in a certain place – just think about the Nightingale hospitals that have sprung up.”
“Where some people have enjoyed lockdown, others’ relationships haven’t survived it and this has had knock-on consequences.
“There could be people who need to move because of job losses too. And working from home has left a lot of people looking for a change in surroundings.”
A gap in the market
Right now, according to the data, the supply of rental homes is lagging behind demand. Rightmove says that the number of new rental listings is currently 4% lower than this time last year. In the week of 6th April, it fell to a massive 64% below 2019’s levels.
Miles Shipside believes the lack of available rental properties could push up rent prices. It also leaves more scope for landlords to be more selective with their tenants.
“They [landlords] are going to pick those with the best references and who can move in immediately. Those whose credit record is not the best tend to lose out,” he added.
The UK’s rental market has been a growing sector for the past 20 years. As people’s attitudes towards renting have changed, coupled with affordability issues, it has begun to become more of a lifestyle choice for thousands. The advent of the build-to-rent sector is a good example of how tenants now expect a higher standard of living from their rental homes, and are willing to put homebuying plans on hold while they prioritise living in their chosen location for longer.
Where to invest
For property investors currently looking at the UK housing market, the current high rental demand is something to consider. When demand is high, void periods tend to be lower. Reducing the risk of an investment property sitting empty and untenanted has a major impact on return on investment, as well as lowering risk levels for the investor.
Rightmove has revealed where tenant demand is currently the highest, on a regional basis. The south-west leads the way, where demand for lettings is now 34% higher than it was at the end of May 2019. This is closely followed by the East Midlands (33%) and the West Midlands (31%), both of which are already extremely popular areas for rental property investment.
After this, the south-east is now seeing demand levels at 28% higher than they were a year ago. Yorkshire and the Humber (26%), the east of England (25%), London (23%) and the north-west (21%) finish the list. Interestingly, the north-west region has seen the highest year-on-year increase in demand for sales.