The UK rental property shortage is currently very evident, in this blog we explore why there is such a notable lack of property available for rent across the country and what it means for investors.
Anyone who enjoys a good property search online will have noticed a growing trend, in that at present, there are about four times the amount of properties available to purchase in any given area, versus what’s available to rent. Given the shortage of property available to buy, the shortage of property available to rent is even more acute.
In fact, official figures show that the number of available rental properties in the UK has halved since 2019 alone.
For renters, it’s becoming increasingly difficult to find a property to let, which is pushing rent prices up in the process. The situation is showing no signs of improving either, making for a tough time for renters across the country.
So what is the cause behind the rental property shortage, and what does the situation mean for landlords, either existing or those looking to secure a buy-to-let property in the near future? Here is what you need to know.
What Is Causing A Shortage Of Property To Let In The UK?
In truth, a culmination of different elements are creating the perfect storm in the UK housing market at the buying level. The effects are trickling down to the rental market, especially since many of the issues affecting buyers then have an implication for renters too.
Let’s take a look at some of the main reasons why it’s never been more difficult to find a rental property in greater detail, including what this means for both landlords and renters.
UK Housing Shortage
For quite some time now, the UK housing market has been woefully undersupplied, which is also one of the key reasons that house prices continue to rise.
A few years ago, the government established a target to build 300,000 new homes each year. However, in 2019/2020, the actual number of homes delivered stood at just 243,000. In 2020/2021, numbers fell even lower meaning only 216,000 new homes were completed – this is almost a third lower than the original target. Quite simply, fewer available homes to buy means fewer available homes to let.
During the pandemic, the building of new homes stagnated further than ever before due to a shortage of materials. In particular, the likes of timber, concrete, steel, aggregates and plastic have all been the subject of supply shortages. On many sites, it was literally the case that builders had bricks but no mortar, causing staff to be sent home and projects to be delayed.
Material shortages continue to rumble on. Combined with higher material costs due to rising energy prices, the government could struggle to reach its 300,000 new homes target yet again in 2022.
Tenants Are Staying Put For Longer
The average UK house deposit now costs £53,935. In addition, HomeLet reports that the average UK rent now stands at £1,113 as of June 2022, which is up 10.5% since the same time last year.
These figures translate into renters not being able to afford a deposit or at least taking a lot longer to do so due to higher rent costs.
Although for landlords, this counts as a positive as tenants are staying for longer in their rental agreements, and void periods are less likely. Plus, there is less competition due to the shrinking availability of rental properties.
Record Breaking House Prices
It’s difficult for investors to ignore the soaring property prices in the UK in recent times. Forbes reports that the average UK property rose in price by 13% to a record £294,845 in the year to June 2022.
For any investors who chose to sell up rather than continue as a buy-to-let landlord during the last few months, this would have contributed to the lack of available homes for rent, since we know more homes are now for sale than are available to let.
It’s good to remember that here at Thirlmere Deacon, we encourage a long-term approach to any property investment. Similar to the stock market, it’s easy to get drawn in by ‘perceived quick wins’ when we know that the real value is allowing your investment to grow over time.
But for renters, lucrative property prices for their landlords will have contributed to why fewer homes have been available to let if properties were sold and no longer kept as buy-to-let properties.
Higher Costs For Landlords
Landlords have an array of costs to consider, including everything from buildings insurance to tax, not to mention stamp duty. It’s impossible to escape all costs associated with running a buy-to-let property. However, landlords who have failed to plan financially, including the potential for mortgage rates to increase due to rising interest rates are most likely to run into financial difficulty. If so, the landlord may need to sell the property, which could affect whether it is kept on as a rental property or not.
This is why as an investor it pays to do your research to ensure the opportunity is right for your portfolio, especially when it comes to weather any financial storms.
A valuable aspect to consider is the potential yield of the property since a higher yield will help bring in more income. The UK average yield sits at a low 3.63%, whereas some of our properties here at Thirlmere Deacon have projected rental yields of 7.5% and above.
New Building Regulations & Standards
Older properties are typically not very energy efficient, and may even pose various safety hazards. In a bid to improve the standard of living for tenants, and reduce the carbon footprint of UK homes, the government continues to introduce new safety measures while raising various energy efficiency standards. Landlords must comply with these new regulations to be able to legally let out their properties.
For instance, as of April 2021, all rental properties must hold valid EICR certificates which guarantee the electrical safety of the property.
Energy efficiency-wise, properties must have a minimum of an ‘E’ rating for EPC (energy performance certificate). As of 2025, this requirement will increase to a minimum ‘C’ EPC rating.
Any of our investment properties here at Thirlmere Deacon are newly constructed or updated, so are automatically built or brought up to the latest standards. However, this isn’t always the case for other properties purchased elsewhere, especially if they are significantly older or dilapidated.
For example, if you purchase a doer-upper home, bringing it up to the relevant safety and energy efficiency standards on top of the costs of general renovation work can add a significant cost to your project. It will be interesting to see how this impacts the enthusiasm toward property flipping in the near future, as building standards are raised further still.
A casualty of these improved standards are those homes which don’t have the correct certification, as legally, these homes will be unavailable for renting out unless the required improvements are made.
What Does All Of This Mean For The Lettings Market?
The shortage of rental properties means different things depending on whether you’re a tenant or a landlord.
For tenants, it’s more difficult than ever to find a property to rent, and rental prices are increasing as a result.
Unlike in the US, the UK does not have rent control, with government ministers also ruling out the possibility of introducing rent control here to deal with the cost of living crisis. Therefore, it is highly likely that rents will continue to rise for tenants.
Landlords who do persist with their buy-to-let properties, or indeed join the market now are set to gain because they have an asset that’s in high demand. The housing shortage, not to mention any of the other issues that are affecting the supply of rental properties is unlikely to be solved anytime soon. All of which remains positive for investors.
For landlords, there’s also property in other countries to consider as an investor too, with the Dubai property market offering endless opportunities for investors as the city continues to take shape.
In summary, it’s definitely a constantly changing picture for the UK rental market. What is clear is that demand isn’t anywhere near what’s needed, which is of the benefit of investors rather than renters.
UK Property Investment – Thirlmere Deacon
Are you interested in making your first property investment, or are you wanting to add to your existing portfolio? Thirlmere Deacon has a number of buy-to-let investment opportunities across the UK including London, Manchester, Liverpool and beyond.
With our investment properties starting at just £75,000, and rental yields well above the national UK average now is the time to capitalise on a fantastic outlook for UK landlords.
If you’d like any further advice on anything we’ve mentioned above, or if you are considering investing in one of our opportunities, please drop us a message or call us on +44 (0) 2039507939.