Lettings market cooling fast but ‘a long way off normality’

Demand for rental homes is easing and supply rising but the market is a long way off returning to pre-pandemic ‘normality’ says Rightmove.

The portal’s latest monthly rental market tracker reveals that while supply has risen 14% year-on-year and demand has dropped 16%, pressure on the private rented sector remains intense.

Rents increased across the UK over the past three months by 7% to £1,314, an all-time high, while in London the new high is £2,661. These figures are created by comparing Q2 last year with Q2 this year.

While this is bad news for tenants, Rightmove’s figures reveal that pressure on lettings agents has been easing, with the number of enquiries per rental property dropping from 26 last to year to 17 now.

But while Rightmove has welcomed Labour’s plans to reform the sector and offer tenants ‘greater security’ it is worried that ministers are not offering encouragement to invest in rental homes or help them pay for energy efficiency upgrades, its latest report reveals.

Difficult

“With 17 enquiries for every available rental property, the market remains out of balance and difficult for tenants,” says Rightmove’s Director of Property Science, Tim Bannister.

“We need landlord investment to increase stock and help achieve a healthier supply and demand balance in the market.

“There is an opportunity to encourage landlords to continue to invest in good quality homes, for example through tax changes, incentives to help with energy-efficient upgrades or a general sentiment change in government towards working alongside and with landlords.

“Landlords have previously told us that the government’s perception of landlords is one of their main concerns about the sector. Support for both tenants and landlords will be key to achieving long-term stability in the rental market.”

Reaction

Tom Bill, head of UK residential research at Knight Frank

“The extent to which rents have risen in recent years underlines the dangers of disincentivizing landlords,” he says.

“A growing burden of red tape and taxes means many have sold up and falling supply has increased upwards pressure on rents. Any new legislation designed to protect the rights of tenants must therefore be careful that it doesn’t come with a high price tag.”