Affordability limits have been reached in several regions of the UK, the Home property website suggests.
While some regions are still recording eye watering annual rises - for example, 18% in Scotland and 11.1% in the north east of England - other regions such as the south west are showing far lower rises. Greater London is now one of the worst-performing regions at just 1.8% annual rent growth due to a large increase in supply year-on-year.
Eight prime boroughs now show year-on-year falls, Home says, while the all-Britain yearly rise now coming in at 6.1% on average - a drop from 9.7% just a month ago.
Home says that the long term strength of the rental market remains a key factor in supporting the sales market. High demand has meant letting is both a profitable and speedy alternative to selling, while the high cost of renting supports demand from homebuyers and investors alike. Across Britain, rents are 49% higher than they were five years ago.
In the sales market prices fell by 0.6% during October in line with seasonal expectations.
The total stock of unsold properties on the market also fell, as is normal towards the end of the year.
Overall, despite higher borrowing costs, Home insists that the current market indicates clear similarities to that of pre-Covid years 2018 and 2019 in terms of price movements and stock levels, although lower Typical Time on Market for unsold property and tighter supply suggest a somewhat more robust marketplace and therefore greater price support.
Bidding Wars soar as tenants compete for dwindling supply
It’s claimed that as many as one in five tenants has lost out in a rental bidding war during the last two years, with tenants in London, Southampton and Brighton the worst affected.
That’s the claim from David Hannah, chairman of Cornerstone Tax, who says "the national average shows that in the past two years 17% of tenants UK-wide have lost out in bidding wars. But the figures go far higher in some markets - 20% in Manchester, 26% in London, 27% in Brighton, and 28% at Southampton."
Controversially, Hannah asserts that the Renters Reform Bill, including the proposed abolition of Section 21 eviction powers, provides “a positive step in the right direction” but falls short of the long-term solutions needed to make the market attractive for landlords and tenants alike.
According to Cornerstone, 15% of landlords are considering selling up due to the rising costs associated with their property, with the average landlord losing £7,500 amid sky-high mortgage rates and unfavourable tax changes.
“The exodus of landlords across the country has been a direct contributor to the current supply and demand imbalance, perpetuating a vicious cycle where tenants across the country continuously lose out. Our data highlights a clear issue in the UK's rental market, many of these landlords took out mortgages on buy-to-let schemes during a period of sustained low interest rates; fast forward to 2023 and the pressure currently facing landlords is simply too much. Spiralling interest rates and the highest tax burden since the second world war have forced thousands of landlords to sell up, which then puts further pressure on renters due to a lack of stock.
It’s unfortunate that many renters from across the country now feel the need to jump through multiple, previously unnecessary hoops to secure a rental property – the Government’s proposed Renter’s Reform Bill would undoubtedly relieve the stress of many tenants, but I’d argue that policymakers ought to be assessing the root causes of the current rental market turmoil. Last week’s major headline was that the rate of inflation had fallen dramatically to 4.7%, that should have been the signal for the Bank of England to begin looking at cutting the interest rate in order to inject short-to-medium term optimism into the UK housing market. Despite this, interest rates remain at 5.25% and will continue to do so until the BoE’s next major decision.
Whilst it’s positive to see many of the UK’s major mortgage lenders slashing their rates, with Halifax now offering five-year fixed rates at 4.53%, the dream of home ownership remains a pipe dream for many. What’s needed going into 2024 is a commitment from the BoE to prioritise first-time buyers by signalling further cuts to the interest rate” said Hannah.