Supply and demand gap widens in private rented sector

Surging tenant demand coupled with a cooling of interest from buy-to-let investors is set to increase the gap between supply and demand in the private rented sector.

According to new figures from the Royal Institution of Chartered Surveyors (RICS) 44% of its members saw an increase in tenant demand in May, with almost two thirds reporting an increase in landlords looking to sell their properties. 

Alongside this, a similar proportion said there has been a decline the level of interest from new UK based buy-to-let investors over the past six months, while 30% also cite a decline in interest from overseas buy-to-let investors.

New landlord instructions were also down 23%.

The organisation, which surveys Chartered Surveyors who operate in the residential sales and lettings markets on a monthly basis warn this could force rents up for tenants.

The report said: “With all of this contributing to the continued mismatch between rising demand and falling supply, rental prices are expected to rise by a net balance of 53% of respondents over the near term. 

“Moreover, rental price growth is now expected to average just shy of 6% per annum over the course of the next five years.”

NRLA research findings

These findings echo research commissioned by the NRLA showing the number of landlords planning to sell rented properties has reached its highest rate on record.

Data collected by research consultancy BVA-BDRC found that in the first quarter of this year, 33% of private landlords in England and Wales said they planned to cut the number of properties they rent out. 

This is up from the 20% who said they planned to cut the number of properties they let at the same time last year.

By contrast, just 10% of landlords said they plan to increase the number of properties they rent out.

The increased in demand recorded by landlords was even higher, hitting more than 70% in every region of England and Wales.

Supply crisis

The NRLA has been warning of the potential impact of the rental supply crisis for some time, warning Government it will be renters who ultimately lose out. 

NRLA Chief Executive Ben Beadle said: “Data from RICS, the NRLA and others all shows a rental market in crisis. We need action from the Government to support responsible landlords to provide the homes to rent the country desperately needs. 

“The full impact of taxation changes are now being felt which, alongside the economic downturn and the publication of new legislation – the Government’s Renters (Reform) Bill – is creating a perfect storm of uncertainty for landlords.

“We are calling for a full review of the impact of tax rises on the sector and for ministers to develop new, pro-growth tax policies to support landlords to meet the ever growing demand from renters.” 

More information

•    To read the full report from RICS click here.
•    To read the NRLA’s latest Landlord Confidence Index click here. 
•    To read more about the NRLA’s Rental Reform campaign and to visit its information hub click here.