Tenant demand in the private rental sector remains sky-high in many areas, and the current climate suggests it won’t be abating any time soon.
Almost two thirds (62%) of buy-to-let landlords say they have seen an increase in tenant demand for their rental properties over the past 12 months, according to a survey released by bridging loan broker Finbri. This coincides with overall demand for rental properties being up by 23% year-on-year across the UK.
This heightened need for homes in the private rented sector looks set to continue, as 75% of tenants involved in Finbri’s survey said they didn’t think they would be able to own a property in 2023. More than ever, landlords are essential in providing much-needed accommodation in areas of high demand.
Costs are one of the biggest barriers to tenants getting onto the property ladder, exacerbated by the cost of living crisis, and 54% of tenants said that they struggled to save up enough money for a deposit on a property of their own.
Staying in the market
When tenant demand is high, this often provides buy-to-let landlords with a greater impetus to stay in the market and reinvest, although it is essential to choose property in an optimum location in terms of tenant need and the potential for yields and capital growth.
In Finbri’s survey, 45% of landlords said that, despite the current economic climate, they believe now is a good time to invest in the property market. Although growth in house prices has slowed, it remains a strong housing market nonetheless, and high tenant demand boosts this appeal.
A further 45% also said that they plan to invest in more property in 2023, while 30% said they wouldn’t invest at present and 25% were unsure.
In order to combat cost rises, including higher mortgage rates off the back of the Bank of England hiking its base rate, 52% of landlords surveyed said they plan to increase rents.
Finbri’s Stephen Clark says: “The base rate is directly linked to the cost of borrowing, so it’s not surprising that landlords are looking to increase rents.
“It’s not just tenants who may be affected by rent increases if interest rates continue to climb. The UK housing market as a whole could experience further undersupply and combined with a recession looming, there is the growing risk of a property market crash. With the base rate expected to reach 4.5% this year, 45.35% of landlords would consider alternative investments, whilst 44.66% would look to sell their investment properties.
“However, despite the looming impact of increasing rates on landlords, our research shows that 45% are planning to invest in property this year.”
Tenant demand significantly higher than pre-pandemic
In Rightmove’s latest rental tracker, which honed in on figures from the final quarter of 2022, it revealed that the number of people enquiring about rental property was up by 53% compared with pre-pandemic 2019, showing a huge surge in tenant demand that has been sustained.
When looking at the year-on-year data, tenant demand was up by 7% compared with Q4 2021. However, in a sign of the pressure easing slightly, the number of available homes to rent was also up by 13% compared to last year – the biggest annual jump seen since May 2013.
This means competition levels are improving for tenants, although landlords in many areas remain inundated by enquiries when they list a property to rent.
In terms of rental costs, Rightmove expects average asking rents for newly available rental homes to increase by 5% over the course of 2023, “unless there is a significant addition of available homes to rent”.
As of Q4 2022, according to Rightmove, the average national rent per month was £1,172, a 0.9% increase from the previous quarter and a 9.7% increase from the previous year.