The UK’s property market is facing a significant challenge as the availability of homes for rent has plummeted to its lowest level in five years, exacerbating the difficulties tenants face in finding affordable accommodation.
This alarming trend was highlighted in a recent analysis, which revealed that in 2023, only 261,542 private rental homes were available per month in the UK, marking a steep decline from the 379,459 monthly average of rental homes available in 2020 – a drop of 31%, underscoring a worrying trend that has been developing over recent years.
This scarcity of rental properties is occurring against a backdrop of increasing mortgage costs for landlords, which, in turn, places additional pressure on the rental market. Higher interest rates, coupled with a high demand for rental properties, have led to significant increases in rental prices (rising from £1,343 pcm in 2020 to £1,739 pcm in 2023 – an increase of 29%), making it increasingly difficult for tenants to find affordable housing.
The difficulties tenants face are further compounded by the financial pressures on mortgaged landlords, who have seen the affordability of mortgages decline sharply. This has led to a re-evaluation of their business models by some landlords, with a resultant divestment from rental property portfolios in some cases. The impact of this on the market has been profound, with average buy-to-let mortgage rates experiencing a sharp increase, further exacerbating the challenges landlords and tenants face.
In summary the UK rental market’s dynamics have shifted significantly, with rents rising by 29% as available rental stock slumped by 31% since 2020.
How does this benefit St Albans landlords?
The current property market could present a notable situation for St Albans landlords – let’s look at the background statistics and numbers for the St Albans area. As we saw earlier, average rent has increased from £1,343pcm to £1,739pcm since 2020 but the average monthly stock levels of private rental homes in the St Albans area has also changed:
- 2019 – 552 rental properties per month
- 2020 – 517 rental properties per month
- 2021 – 470 rental properties per month
- 2022 – 489 rental properties per month
- 2023 – 465 rental properties per month
So, whilst rents have risen by 29%, the level of available properties has also shrunk by 10% in the same time period.
The escalation of rental prices signifies a robust income stream for St Albans property investors. This is particularly advantageous in a market where high demand ensures properties are let swiftly, often to quality tenants willing to pay a premium for scarce housing options. For St Albans landlords, this means not only an immediate increase in rental income but also the prospect of sustained long-term profitability as market dynamics push St Albans rents even higher.
Furthermore, the challenging mortgage landscape, with rising buy-to-let mortgage rates with high percentage mortgages, has meant more landlords leaving the market thereby reducing competition and potentially increasing the demand for existing St Albans rental properties even further. This unique set of circumstances means current and prospective landlords will see this tight supply leading to higher rental yields and enhancing the attractiveness of property portfolios.
What about St Albans tenants?
As the UK grapples with this challenging rental market landscape, a multifaceted approach is needed to address the underlying issues. This includes considering the impact of mortgage costs on landlords, the affordability of rents for tenants and the overall availability of rental property.
The Government needs to build more homes. Yet excluding land, the building costs in the UK start from £163 per square foot. A 3-bed semi is a minimum of 1000 ft². The most conservative estimate shows that Britain is approximately 2 million households short now, meaning the bill for those additional 2 million homes would be £326bn (excluding the land). For context, the NHS costs £181bn a year!
The Government currently spends £17.35bn a year on housing, which would need to increase to £49bn a year for the next ten years to pay for those 2 million homes. To give you an idea of what that would cost taxpayers, income tax would need to rise by 5.81 pence in the pound to pay for those additional 2 million homes!That is the equivalent of an extra £991 per year for every taxpayer for the next ten years – not a vote winner! Yet without significant Government intervention and strategic planning, the difficulties tenants face in finding affordable homes will likely persist, with potential long-term implications for the housing market and the broader economy.
Meanwhile, British landlords must pick up the pieces and continue to buy properties. Unfortunately, it is the nature of the game that with limited supply and increasing demand, prices (i.e. rents) go up. It’s certainly not easy for some St Albans tenants having to pay these increased rents, but it’s where the market is going. It has been proved beyond doubt, in Scotland and around the world, that rent controls do more harm than good, so I hope that the Government grasps the nettle and finally does something to sort our housing issues once and for all in the medium and the long term.
