Massive Surge in Demand for Rental Properties
Property investors and private landlords are currently seeing a dramatic upsurge in the demand for rental homes, exceeding three times the rate observed before the pandemic.
A study conducted for the National Residential Landlords Association (NRLA) shows that in the third quarter of 2023, 71% of property owners noticed a significant rise in tenant interest, marking an all-time high. This figure has risen from 65% the previous year and marks a substantial increase from just 22% in the third quarter of 2019, prior to the implementation of COVID-19 restrictions.
BVA-BDRC’s research highlights the West Midlands as the region with the highest demand, where 76% of landlords report increased interest from tenants. Wales and the South East, excluding London, are not far behind, with 75% and 74% of landlords observing a rise in demand, respectively.
Contrary to this spike in demand, 12% of landlords reported selling properties in the third quarter of 2023, a stark contrast to the mere 5% who invested in additional properties during the same timeframe.
Moreover, 28% of landlords plan to shrink their rental property portfolio over the next year, while only 8% intend to expand their holdings.
The NRLA cautions about the growing disparity between supply and demand in the private rental market, which could diminish tenants’ buying power and offset the positive impact of the Chancellor’s recent decision to unfreeze housing benefit rates.
The NRLA underscores the urgency for government action to bolster the supply of private rental homes. This is deemed essential to protect tenants from unscrupulous landlords, especially considering the limited alternative rental options available.
Ben Beadle, NRLA’s chief executive, remarked on the dire circumstances confronting potential renters due to the increasing competition for a shrinking pool of available homes. He criticized the government’s tax policies, which favor investment in holiday properties over long-term rental homes. Beadle advocates for growth-oriented tax reforms, including abolishing the stamp duty tax on purchasing rental properties and revisiting the changes to mortgage interest relief that have adversely affected the sector.
According to a study by Capital Economics for the NRLA, removing the additional 3% Stamp Duty levy on second home purchases could lead to the creation of nearly 900,000 new private rental homes in the UK over the next ten years. This change could also potentially generate an additional £10 billion in revenue for the Treasury, derived from increased income and corporation tax receipts.
