Rightmove says the government elected today must build 120,000 homes to help return rents to what it believes are normal levels, rising around 2% annually.
The demand comes as the portal’s latest lettings index shows that average advertised rents for tenants outside of London have reached a new record of £1,316 per calendar month.
In London, average advertised rents are now £2,652 per calendar month.
The new record means that average advertised rents outside of London are now 7% higher than at this time last year. Whilst the pace of rent growth has eased from its peak of 12% two years ago, it is still much higher than the more normal level of around 2% per year seen before the pandemic.
Rightmove’s analysis shows that approximately 120,000 more rental properties are needed onto the market to achieve this more sustainable level of 2% rent growth per year, based on the current level of demand.
The imbalance between supply and demand from tenants enquiring about homes is one of the key drivers behind the rapid increase in advertised rents since the pandemic, with nowhere near enough homes to satisfy the number of tenants looking to move.
Scotland is currently the hardest hit by supply and demand imbalances, while London is the least affected.
An improvement in the balance between supply and demand in London has contributed to a slowing of rental price growth.
At this time in 2022 and 2023, London saw the joint biggest increases in yearly rents, following a significant widening in the gap between supply and demand during the pandemic.
A decrease of 15% in the number of tenants looking to move in London, and an increase of 16% in the number of available properties to rent in the capital, means that London has seen the biggest overall improvement in supply and demand compared to this time last year.
The result is that rental price growth in London has slowed from its peak of +18% in 2022, to +4%, the joint smallest yearly rise of all areas in Great Britain.
Rightmove is calling on the next government to streamline the planning process, accelerate housebuilding, and provide incentives for landlords to invest in more homes for tenants, to improve the supply and demand imbalance in the rental market and ensure that growth in rental prices is sustainable.
Tim Bannister, Rightmove’s property expert, commented: “We’ve been talking about the imbalance between supply and demand in the rental market for a long time now, so it’s easy to forget that there was a time before the pandemic where rental price growth was more stable.
“Double-digit yearly rent increases were not sustainable, and, whilst there has been some improvement in the ratio between supply and demand, price growth at +7% suggest we are still out of balance. In fact, our analysis shows we would need 120,000 more properties on the rental market to achieve a more sustainable level of rent growth of around 2% per year.
“The next government should be prioritising an improvement to the planning process, an acceleration of housebuilding, and encouraging more supply into the rental market.”
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It's not just a question of randomly building X amount of houses. They have to be the right houses, in the right locations at the right price.
Thanks Jo, you are absolutely right
Property Investment Show yesterday disaster NRLA Seminar still pushing for THE RENTERS REFORM BILL to be brought back on the agenda and brought to a conclusion as quickly as possible, are they totally stupid or tone deaf they are not listening despite the damage they have done to Renters driving up their rents 20/30% and private landlords being forced out too much to stomach.
So how are they going to have any savings with this nonsense carry on and Mr Gove the instigator now steps aside having caused the crisis and brought down his government, which the unfairness of removing Section 21 was always going to do, tens of millions affected by the attack on Housing not just landlords, Tenants but Residential house holders as well with the kick on affect and first time buyers for sure. Also causing owners to switch to AirBnB that they didn’t want to do, just taking more properties out of regular renting.
Why does the government need to build them? They do need to stop planning officers being Uber zealous and free up land near towns and rail transport. It’s time to expand because the population is expanding
Agree, either build on the green belt… or…. drastically reduce net migration 🤷♂️. A lot of people don’t want to hear the stark truth of it.
It is even more than 120.000 homes to balance the complete lack of public housing over the past 30 years. Here I copy the message from Jo: "It's not just a question of randomly building X amount of houses. They have to be the right houses, in the right locations at the right price.". thanks
Ok there’s a shortage of Housing but not so much as they would have us believe. Its no use telling me you had a Property to rent and had 20/30 enquiries, they are currently living somewhere else, they are surfing the internet seeing if they can find a better or cheaper place or location so not as if they are homeless.
Obviously licensing restrictions have reduced the occupancy of many properties adding to the problem while also making it far more expensive the remaining occupants with the same rent divided by less people.
I think we all know the Labour government will have major problems with their housing policy, especially the planning aspect and locals objections 👎🏻😱
Higher rents are certainly not all about the often quoted ‘supply and demand’ dynamics. There are other clear causes such as a grossly punishing tax system ie sec 24, CGT, rocketing mortgage costs etc, then there’s the ‘huge risk factor’ of operating in an illogical and unnecessarily hostile environment compounded by future uncertainty. Landlords are anticipating difficulties and responding by getting their finances to be robust enough to survive.
Or at least robust enough to leave at a time of their choosing rather than being deliberately bankrupted!
Indeed, A JR, I find myself in complete agreement with your perspective.
This article raises a concerning issue for BTL/PRS LLs, and I'm keen to hear other perspectives on this. Striking a balance between affordable housing and a sustainable rental market is crucial.
While the focus on rent increases is understandable, it's important to acknowledge the costs borne by LLs, including mortgages, maintenance, and taxes.
Excessive regulation could discourage investment in the PRS, potentially leading to a shortage of properties and unintended rent hikes.
The government's aim to increase housing supply is commendable. However, it's important to consider the historical role that PRS LLs have played in filling the gap in affordable housing provision. This approach has arguably been much less expensive for the government than building large numbers of new homes directly.
The substantial cost of building 120,000 homes, must be carefully considered.
Based on the average UK house price of £290,000, this would amount to a staggering £34.8 billion! (This is what they're trying to extract from LLs)
Finding a solution that fosters a balance between tenant affordability and LL viability is key. This might involve exploring tax breaks for long-term tenancies or streamlining regulations to reduce burdens on responsible LLs.
Ultimately, open dialogue and collaboration between policymakers, LLs, and tenants are essential to ensure a healthy and sustainable PRS in the UK.
The PRS needs some carrots, not sticks. Scrapping Section 21 without a viable alternative has killed off investment by smaller landlords. CGT should reduce the longer a property has been rented. A landlord should have the same tax breaks as any small business.
Buying a property to rent out is a good way of providing a pension and not being dependent upon the State in their old age.
The central reason why sucessive Gov’s have failed to build sufficient social housing is because it’s astronomically expensive to do and maintain.
The PRS now does the job at far less overall cost and to a better standard, BUT the small capitalist nature of the PRS simply doesn’t suit the current political ideology/ narrative. There is no logical reason to dismantle the PRS except the limp and baseless ‘politics of envy’, most of which is misplaced!
I saw an article recently by an insurance organisation that stated tgat there are c700,000 empty properties in the UK. That ,to me, says that government need to encourage people to rent out properties. That alongside building social housing would benefit all.
I agree in principle with what you say, Jeremy, but if I keep a property empty, it might be because my son will be back from Thailand next year, and I want him to live there. I hope the government will not force us in a way particular labour MPS proposed: a manner to have properties with people in, or they will re possess them. The property is mine and if I am happy to keep it empty, it is my right to do so.
Totally agree 👍🏻 But the socialist mantra goes along the lines of , “ What is mine is my own, and what is yours is also my own “ 👎🏻🤷♂️
Ian - if you keep a property empty the Council now have the right since April to charge/double/treble CT on second homes and this property you have empty will be classed as one if not available to rent.
I'm guessing the folks at Rightmove didn't do maths at school. If net migration is running at around 750,000 a year, if we build 120,000 houses (per year?) that's 6+ people per house. I doubt these houses are that big, so there is still a shortfall. A basic grasp of knowledge on supply and demand economic theory tells you that rents will still go up.
They're all fools. Or they take us for fools. We're all fools together!
Utilisation rates are an issue. How many houses are under occupied? Sometimes from choice because the occupant can afford to have a couple of spare bedrooms but often because there is nothing suitable to downsize into.
How many people would love to downsize from their current Social House because the bedroom tax is crippling their finances but can't get a smaller Social House in their neighborhood? Moving further from work and support network negates the financial point of downsizing.
How many people would like to sell their 4 or 5 bed house with a large unmanageable garden but can't find anything smaller or cheaper that still has a utility room, ensuite, study, driveway and decent size rooms? These aren't the same 2 bedroom houses that are aimed at FTBs. SDLT often removes any financial incentive to move.
Bedroom entitlement is another problem. Why do tenants children (PRS and Social) have bedroom entitlements that homeowners children simply don't have? If a homeowner wants 4 children to share a room they just buy 2 sets of bunk beds. A rental property would be deemed to be overcrowded as it's a maximum of 2 children per bedroom.
Building the high number of homes needed will take time. Every government has a honeymoon period and Labour will do the easy hits first to appease the left and younger generation. My guess is they will increase CGT, Inheritance Tax, immediate rent freeze, blanket eviction ban. The first two tax hikes mentioned will kill of aspiration. Why would anyone get out of bed in the morning to run a business if once he/she has made the money it is taken away. Council Tax will increase dramatically. They will give in to Union pay demands and yes wages do need to increase in some sectors but that causes a spike in inflation and interest rates will have to go up.
The country would be in a better place without all these politicians meddling with things to make themselves look good. Worst of all the money collected by taxation is wasted. The country needs to run like a business. One reason China is doing so well is that they can do long term planning of infrastructure as they don’t have a change of government every 4 years.
Working from home is another nail in the coffin for growth. Apparently a recent survey shows 80 percent are watching television all day!
Many many more houses will be needed to be built under labour as they are going to open the flood gates! A huge influx of new arrivals will drive the rental sector onwards and upwards!
Jaeger - not sure the PRS will be onwards and upwards as they are being wiped out. Probably the Corporates will continue to invest as they have probably been promised exemptions.
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