The UK rental market is facing an unprecedented crisis with 21 tenants vying for each available property. This growing competition is driven by a mix of rising rents and dwindling supply.
Landlords are hesitant to enter or expand in the market, leading to a significant decline in available rental homes. As a result, tenants are feeling the pressure, with many forced to seek more affordable options outside major cities.
Decline in Rental Availability
According to Zoopla, a leading property search platform, the availability of rental homes has dropped by 24% since before the pandemic. This decline is largely due to landlords’ reluctance to participate in the market. This is causing fierce competition among tenants.
Rents across the UK have surged by 30% over the past three years. Although the pace of rental inflation has slowed to 5.4% annually, it still outstrips the 5.1% growth in average earnings over the past year.
In July, the average national rent hit a record high of £1,245 per month, £63 more than a year ago. Richard Donnell, Executive Director at Zoopla, warned that further regulatory or tax changes could worsen the supply crisis, pushing rents higher and hitting low-income renters the hardest.
High Demand and Tenant Competition
The rental market remains highly competitive despite a slight increase in supply from pandemic lows. Demand continues to outpace availability.
The number of prospective tenants per rental property has doubled since before the pandemic. This competition is putting immense pressure on tenants, making it difficult to secure a home.
Landlord Exodus and Regulatory Impact
Since 2016, landlords exiting the market has been a steady trend. This exodus has been influenced by various regulatory and tax changes that have made property rental less attractive to investors.
The lack of new landlords entering the sector is compounding the issue, leading to a shrinking supply of rental properties. This trend is alarming for both tenants and policymakers.
Shift to Smaller Towns and Suburbs
In response to high rents in major cities, many tenants are looking for more affordable options in smaller towns and suburban areas. Over the past year, towns like Kilmarnock, Wolverhampton, and Oldham have experienced double-digit rent increases.
Conversely, rent increases in major cities have slowed. For example, London rents have grown by only 2.5% over the past year, compared to other regions where growth has been more pronounced.
Unaffordability of Home Ownership
The unaffordability of home ownership, particularly in southern England, is pushing more people into the rental market. This shift is exacerbating the supply-demand imbalance.
Zoopla anticipates that this imbalance will persist until at least 2025, with no significant improvement in rental supply expected. This ongoing crisis emphasises the urgent need for government intervention.
Call for Government Action
The current rental market crisis highlights the urgent need for government intervention to address underlying issues. Policymakers must focus on increasing the supply of rental homes, incentivising new rental properties, and reversing the decline in landlord participation.
Without such measures, the pressure on renters is likely to continue, with rising costs and limited housing options becoming the norm across the UK.
Richard Donnell’s View
Richard Donnell points out that regulatory or tax changes in the upcoming budget could exacerbate the current supply crisis. He advocates for increased supply as the key to slowing rental inflation and expanding tenant choices.
The UK’s rental market crisis, marked by intense competition among tenants and rising rents, is a complex issue requiring immediate attention.
Without significant policy changes, the outlook remains bleak for tenants facing limited options and soaring costs. Urgent government action is needed to address these challenges and stabilise the market.
