The forces shaping the rental market
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- 10th Jul 23
If you are trying to find somewhere new to rent right now on the open market, you’ll probably already have experience of how challenging it is. And you are not alone. Demand vastly outstrips supply, leading to bidding wars between potential tenants. We look at how the rental market is holding up and where Build to Rent is offering a much-needed alternative.
Rental in London dropped to a new low
A new report from the London School of Economics and estate agents Savills, has shown rental listings have declined across the Capital since the pandemic, with the number of one, two and three-bedroom properties listed to rent in inner and outer London declining by around 36% since the coronavirus pandemic. Furthermore, listings for four-bedroom properties in London declined the most, with availability reduced by almost 47%.
Build to Rent in the capital
Investors spent £2.7bn on Build to Rent in London last year, as the sector grew to almost 40,000 built homes. London has yet to see a slowdown in the number of homes under construction in the region, offering a vital new source of supply.
What’s new in London for Build to Rent
There’s a whole host of properties for you and your pets at the Get Living development with a range of modern, furnished one-to-three-bedroom apartments to rent in Elephant and Castle. Lots of choice available with new homes coming to the market on a regular basis. Residents have access to a shared club room, outdoor space, free Wi-Fi, bike storage, resident events and underground parking facilities available to rent. Experience all that the capital has to offer with fantastic travel connections, Oxford Circus is just ten minutes away. What’s more, there’s no deposits required.
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Each spacious apartment has been designed and built to a high specification, giving you the very best of modern living.
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Rents continue to rise
The UK has seen 9.7% growth in rents over the last 12 months and in London it has been 12.5%. Scotland has seen a 15.8% annual growth and the West Midlands 10.8% growth. In the Build to Rent sector, annual rental growth was 6.9%, with this at a similar rate to wage inflation.
Rents versus earnings
In the wider rental market, new lease rental growth has been rising at a faster rate than earnings growth meaning that many renters are feeling the squeeze. However, in the Build to Rent sector, a steadier growth has meant that affordability has remained broadly stable. Crucially, when you sign up for Build to Rent, you are dealing with professional landlords so there will be no unexpected price hikes. Additionally, perks such as maintenance, gym access or communal areas will be part of the monthly rental agreement, meaning that savings can be made on other living costs.
Demand outstrips supply
The RICS May 2023 residential survey showed a net balance of +44% of respondents reporting an increase in demand. New rental supply continued to fall, with a net balance of -23% of respondents reporting a decline in landlord instructions. There are also several other factors as to why more demand is needed including the financial challenges for first-time buyers, increased uncertainty in the housing market and a weaker economy.
Landlords exiting the market
According to Zoopla’s sales data, there has been a steady flow of private landlords selling up. With increased mortgaged costs, those landlords who are coming off fixed mortgages will be exposed to higher rates and more likely to sell as their profit margin is squeezed. This is not good news for tenants who have made a rental property their home and will be upset to have to leave. Furthermore, as buyers struggle to sell their homes, there may be an increase in ‘accidental landlords’, people forced to rent their homes but who may not choose to become landlords and perhaps not doing it for the right reasons.
More stability for tenants
With landlords leaving the market, residents will rightly be looking for stability. For Build to Rent customers, they will not have the same fears regarding their home being sold or length of contract offered. One of the many advantages is that the customer has control over how long they want to stay in the property with flexible leases, offering anything from a few months to several years. The homes have been built specifically to rent and the professional landlords will have everything in place to ensure the customers receive the best experience.
Slowdown in building
Planning permission for new homes has slowed and is down 11% on last year, adding further pressure to the rental market. In the UK, there are now 82,505 complete Build to Rent units, up 9% on last year. Although Build to Rent construction has slowed, apart from in London, Single Family Housing (SFH) is one area that is growing. There are now 9,566 completed SFH units in the UK, 5,210 under construction and 9,751 in planning. With more families needing to rent, this is positive news to ensure there is enough excellent quality homes with additional community features available.
The future of Build to Rent
Increased investment in the Build to Rent sector will ensure its future and choice for renters. According to the Cushman & Wakefield report, several major investors are looking to increase their exposure in the market because the sector is outperforming equities, bonds and other real estate investment vehicles. What’s more, traditional housebuilders are reaching out to the Build to Rent sector as they are looking to de-risk some of their existing schemes and sell block opportunities. This will lead to further choice for Build to Rent customers across the UK with a wide range of different accommodation options available.