Tenant demand remains high, giving landlords a boost as they prepare for reforms to the rental market.
The government revealed its long-awaited Renters’ Rights Bill last week, signalling the end of ‘no-fault evictions’ and changing the rules around tenancies.
It is another regulatory change for landlords who have already been hit with tax relief restrictions on buy-to-let and extra stamp duty charges on additional property purchases.
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Despite this, high house prices continue to keep many people in the rental sector, providing plenty of demand for landlords holding on to their buy-to-let portfolio.
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New data from Foxtons shows that rental demand in August continued to reach record highs for 2024, with an average of 23 new renters per new instruction in London – up 23% on a monthly basis.
Meanwhile, Office for National Statistics (ONS) data released today also shows average UK private rents increased by 8.4% in the 12 months to August 2024, down from 8.6%.
It marks a traditionally busy period for the rental market as students move to new accommodation ahead of the academic year while families may move to get closer to a school catchment area.
“July and August were the busiest months this year, as you’d expect, with August seeing a remarkable 23% month-on-month increase in renters per new instruction,” says Gareth Atkins, managing director of lettings at Foxtons.
“As we approach the fourth quarter, which is usually a quieter period, landlords should make the most of this month's market activity to secure quality tenants. This month goes remarkably fast, and strategic marketing now could make a significant difference over the next year.”
Rental market demand
London has always been a popular location for renters as high house prices can make it harder to buy a property.
However, falling mortgage rates have meant buying is cheaper than renting again, while the cost of living crisis has meant many tenants have reached a limit of what they can afford to pay.
These factors have hit rental growth.
But a lack of supply in London, partly due to landlords exiting amid lower rents and higher costs, is keeping demand high for those sticking with buy-to-let.
Location remains an important factor though.
Tenant demand in central London was up 15% annually, according to Foxtons, but fell 13% in the south and by 20% in the west of the capital.
In some good news for landlords, applicant budgets remain 2% higher year-on-year, the highest seen of any year.
One-bed flats have seen the highest increase year to date with a 5% increase, now sitting at an average of £472 per month, according to Foxtons.
Is buy-to-let still worth it?
Sales of former rental homes appear to be on the rise as landlords fear tax changes in the October Budget and the Renters’ Reform Bill.
Buy-to-let investors have also been hit with higher mortgage rates and restrictions on tax relief, denting landlord profits.
They also need to price their rent competitively to attract tenants who are struggling with high bills.
Foxtons’ data echoes these concerns.
The number of new listings coming to the market was up 7% year on year, but there was a 13% decrease month-on-month.
The lack of supply may be good news for remaining landlords though.
Even if rental yields are slowing, rental growth remains high.
ONS data shows average rents increased 8.5% annually in England and Wales to £1,327 and £752 respectively and rose 7.6% in Scotland £969.
Rent inflation was highest in London at 9.6% and lowest in the South West at 6.4%, suggesting landlords can still get inflation-beating returns on buy-to-let.
“Rents have continued to rise sharply, reflecting the ongoing shifts in the rental market landscape,” says Alex Upton, managing director, specialist mortgages at Hampshire Trust Bank.
“With tenant demand remaining robust and rental stock not quite keeping pace, it’s no surprise that rents are climbing.
“As the Royal Institution of Chartered Surveyors has noted, while more landlords are bringing properties to market, tenant demand is still outstripping supply. This imbalance is likely to push rents higher as we move forward.”
