House Graph House Graph
House Graph

Rental Supply Falls as Demand remains Upbeat

Rent Guarantor Nov 23, 2021

The UK's supply of rental homes is once again coming under pressure as demand from tenants across most regions continue to recover from the lows seen during the height of the pandemic. Two separate surveys report that demand from tenants is rising across the country with London in particular experiencing a sustained period of increased interest.

However, while rents are on the up amid this ongoing rise in tenant demand which isn't welcome news for the country's renters, yields have yet to recover enough to encourage buy-to-let (BTL) investors to make a notable return to the market. Without a significant decline in property sale values, the imbalance could get worse over the coming months.

Demand Outstrips Supply Across London

The year 2020 saw demand for rental homes in the suburbs, countryside and areas with more space surge which left city spots, particularly London, with an oversupply. However, the second half of 2021 has witnessed the return of rental demand with corporate and student interest ensuring both ends of the market are proving popular.

The latest quarterly rental report from property management firm Cluttons shows that average rents in London - and across the UK - have risen firmly compared with the third quarter of 2020. The property expert adds that in some cases, demand for particular properties in certain areas of the English capital have resulted in rental offers of between 5-10% over the advertised monthly price. This comes as tenants demand has surged but new supply of rental properties remains sluggish.

Although, it is worth noting that the super prime rental market in London hasn’t seen such a resurgence in activity.

“The rental market recovery picked up pace in Q3, with demand driven by corporate tenants returning and executives in the City and Canary Wharf heading back to their offices,” said James Hyman, head of residential properties at Cluttons. He adds that  “The sub-£1000 per week market in particular is extremely active,” and that’s due to the combination of “graduates starting jobs, the opening of universities, and the return of international students.”

Rental Stock Down by Almost 50% Vs 2020

A separate report from property website Home also underscores the problem with a lack of supply in the UK’s lettings market. In it’s November release it states there are 46% fewer rental homes available compared with November 2020 which has contributed to an average increase in rents of 6.5% in the UK compared with a year earlier. On a regional basis, south west England has seen the strongest rise in rents - +10.5%.

Meanwhile, the report adds that this ongoing scarcity of supply is evident in all regions, with the exception of north across the country and will result in further rent increases going forward.

With a continued lack of rental homes available for the ongoing rise in demand in the lettings market, many tenants may well have little choice but to stay put and wait until the imbalance between supply and demand improves. However, until more investors return to the market – which is currently happening only very slowly – there is little end in sight to the rising rents and limited options currently facing tenants.

House Graph House Graph
House Graph