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The demand for rental properties has skyrocketed in recent years, as potential tenants encounter fierce competition to secure their ideal homes.
The average number of viewing requests per rental property has increased more than threefold since 2019, with a typical British property now receiving around 20 inquiries, based on data gathered by Rightmove for the BBC. In fact, areas such as the North West have seen the average number of applicants surge to as many as 30 per property.
Before the pandemic, an average property listed on Rightmove would typically receive about 6 inquiries, with regions like the North East attracting fewer than 3 applicants on average. However, since then, the number of renters pursuing available properties has surged to triple the 2019 figures. The South West and Midlands now see more than four times as many applicants per property compared to pre-Covid times, as potential tenants compete for a dwindling supply of available homes.
Reports from letting agents suggest that applicants are driving up rents in an attempt to secure the best properties and avoid the stress of house hunting. Paul Forbes, a real estate agent in Preston, notes that properties are often rented after the first group viewing due to the high demand, adding that selecting the successful applicant is “not a nice part of the job.”
Research by The Royal Institute of Chartered Surveyors (RICS) underscores the significant imbalance between supply and demand for rental properties in Britain. Their UK Residential Market Survey gathers feedback from real estate agents across the country, scoring their responses from negative 100 to positive 100. A score closer to either positive 100 or negative 100 indicates a more unanimous response. In June, a net balance of 40% of respondents reported an increase in tenant demand. Meanwhile, the net balance of landlord instructions (new rental properties entering the market) was -36%, continuing its downward trend. As a result, a compelling +53% of respondents expect rents to rise in the next three months, with the data suggesting that rents are expected to rise by as much as 3% in the year ahead.
Why is Competition for Properties so Fierce?
The revelation of intensifying competition among tenants for a shrinking pool of rental properties is hardly surprising. Soaring interest rates and shortsighted government policies have contributed to a severe imbalance between the supply of available rental homes and the genuine demand for them, a situation that benefits neither landlords nor tenants.
Although house prices have wavered in the past 12 months, rising interest rates have caused mortgage payments to grow exponentially. A typical mortgage with a 10% deposit now costs over £1,250 per month, compared to a similar monthly rental cost of just above £1,000. The graph below illustrates the challenges faced by first-time homebuyers in purchasing their first property, which has led many to consider rental properties as a more cost-effective option, thereby increasing demand.
Furthermore, unfavourable government legislation and escalating variable rate mortgage payments have compelled a growing number of landlords to sell their properties and exit the market. Research by the National Residential Landlords Association in the first quarter of 2023 found that a third of its members in England and Wales intended to cut the number of properties they rent out. RICS senior economist, Tarrant Parsons, explains: “Interest rate hikes are also affecting the rental sector, and when combined with the upcoming reforms proposed in the government’s Renters (Reform) Bill, landlords are increasingly choosing to leave the sector and sell their properties, resulting in additional constraints on the supply of rental properties.”
In summary, fewer properties are available to a growing number of potential tenants, resulting in a surge in inquiries per property. This trend appears likely to persist in the near future, especially with the introduction of the Renters (Reform) Bill. However, in the long run, interest rates are anticipated to retreat from their current highs and return to more manageable levels. This should contribute to lower mortgage rates for first-time buyers and may help alleviate some of the supply imbalance.
References
BBC. (2023, July 26). Renters compete with 20 others in battle to find a home. Retrieved from www.bbc.co.uk: https://www.bbc.co.uk/news/business-66246223
National Residential Landlords Association. (2023, July 28). Average 20 viewings for each rental property listing, research reveals. Retrieved from www.nrla.org.uk: https://www.nrla.org.uk/news/average-twenty-viewings-for-each-rental-property-reveals-research
Peachy, K. (2023, June 08). More pain for renters as landlords look to sell up. Retrieved from www.bbc.co.uk: https://www.bbc.co.uk/news/business-65833840
Rightmove. (2023, July 17). House Price Index. Retrieved from www.rightmove.co.uk: https://www.rightmove.co.uk/news/content/uploads/2023/07/Rightmove-House-Price-Index-17th-July-2023.pdf
Royal Institute Of Chartered Surveyors. (2023, July 11). UK Residential Market Survey. Retrieved from www.rics.org: https://www.rics.org/content/dam/ricsglobal/documents/market-surveys/uk-residential-market-survey/6._WEB_June_2023_RICS_UK_Residential_Market_Survey_tp.pdf
