Propertymark says there’s no change in the mismatch between supply and demand in the rental market - unfortunately.
Chief executive Nathan Emerson, in the body’s latest market snapshot, says “Governments across the UK continue to tinker with legislation and legislative programs, disincentivising landlords along the way. Supply remains tight with far more applicant registrations than properties available. Pressure on rents continues although there are some signs of restraint in this months figures compared to last month."
In terms of numbers, new prospective tenants registered per member branch dropped to 96 in September 2023 from 121 in August 2023, which is likely due to seasonal fluctuations in demand.
The average number of properties available to rent per member branch in September remained broadly the same as in August at 11 properties.
It should be noted that there has been little fluctuation in supply levels over the last 12 months. However, this level of supply remains drastically below the current level of new applicants registered. Although there has been a downward trend over the last few months, it is clear that demand (in the form of registrations) continues to outpace supply.
On the sales side there’s been a reduction in buyer numbers to 60 in September from 81 in August - although at least some of this is likely to be down to seasonal trends. The average number of viewings per property remained static in September at two, which is lower than the 18-month rolling average of three.
Propertymark says this comes just as gross mortgage advances have been sluggish, especially for landlord buyers whose share of the mortgage sector slipped from 9.8 to 8.1% by mid-year - the latest data available. The number of new homes placed for sale per member branch has decreased from a round 13 to 11 although that supply remains above the 12-month rolling average of nine per branch.
The average stock of properties available for sale per member branch decreased from 45 in August to 39 in September 2023, while the average number of market appraisals conducted per member branch fell to 20 from 25.
Around eight sales agreed per branch remains the monthly norm, while very few properties now sell for above the asking price and the time taken to exchange contracts is elongating with agents reporting more properties taking 17+ weeks for exchange to take place.
Emerson says “uncertainty continues to pervade the UK economy and the housing market in general. Whilst the interest rate hold in September was good news, it offers little respite for those who need to remortgage or those seeking leveraged entry into the housing market. However, despite inflation remaining stubbornly high, it is moving in the right direction for both households and businesses. In the residential sales sector, there has been a slight reduction in the number of available properties in September 2023. This reflects ongoing market uncertainty, but we expect this trend to level out in the short term. More concerningly, the vast majority of properties continue to sell below asking price pointing to a pricing correction despite average house prices continuing to rise.”
New analysis puts average asking rents approaching £2k
The average asking price across the UK based on the available stock is now £1,829 per month according to property consultancy TwentyCi. This figure is significantly higher than market snapshots from other sources in the industry.
This is an increase of £178 per month since Q1 2023 and £500 extra per month since Q3 2019. It says the significant shortage of rental properties compared to the demand remains a driving force behind the increase in rental rates.
“The departure of many landlords from the market due to tax and regulatory changes has resulted in a further decrease in available properties. Additionally, as interest rates rise and energy costs remain uncertain, we anticipate landlords passing on these increases to tenants through rent hikes” the consultancy’s latest market snapshot says.
Other than Scotland, all regions and major cities across the UK have seen a significant increase in the number of Let Agreed properties.
The volume of Lets Agreed has risen by 2.8 per cent in the last year but has fallen 18% since the pre-pandemic year of 2019. The slight rise in supply is driven by sellers not finding a buyer and electing to rent; tenants moving to other locations; and possibly landlords entering the market based on the returns that can be made at the higher rent levels.
No rent controls in England - government confirmation
Rent controls as currently in force in Scotland and under consideration in Wales will not be put into effect in England, the government has made clear.
In a letter from Housing Secretary Michael Gove to the all-party Select Committee on Housing, Gove rejects a call for Valuation Office Agency data to be made public so some form of assessment could be made as to what constitutes “a justified rent increase.”
He says “rents in the private rented sector should be agreed between landlords and tenants, and it is not for government to intervene in this. We are clear that landlords must be able to raise rents in line with market prices, but that rent increases which are significantly above this should not be used as a means of backdoor eviction. Where there are disputes between a landlord and tenant, the First-Tier Tribunal is best placed to resolve these and to determine the market rent. Making a balanced judgement on what the market rent is means a number of different factors need to be taken into account, such as quality of fixings or proximity to amenities.
The Tribunal has experts who can assess the true market value of a property, and it is for those individuals to determine which evidence is relevant. We will update guidance to support all parties in engaging with the Tribunal.”
The Select Committee - which does not make policy but consists of MPs from across the Commons who scrutinise government policy - also calls for the government to “stipulate by how much rents will increase” and to initiative mandatory break periods during which tenants could appeal to the First-tier Property Tribunal if they think their rent has risen above local market rents.
Again Gove rejects this approach , saying it is right to abolish rent review clauses, and says “the government wants to avoid very large rent increases being used as a backdoor to eviction, while ensuring that landlords can increase rents to market prices. In the new system [under the Renters Reform legislation, if it becomes law] landlords, as they can now, will be able to increase rents once a year at the rate they deem appropriate. It is only if a tenant thinks this is above market levels that they can challenge this at the First-tier Tribunal. When this happens, an independent expert panel will assess the market price for the property. This could be higher, lower or in line with what the landlord set.
The government is clear that rent should be agreed between the landlord and tenant, and nothing in our proposals prevents parties negotiating as they do now. It is not for government to set or steer rent increases and we do not support the introduction of rent controls. Evidence suggests that these would discourage investment in the sector and would lead to declining property standards as a result, which would not help landlords or tenants. Rent review clauses can provide a means of backdoor eviction through removing the right to challenge above-market increases and may reduce flexibility for landlords to respond to market changes.”