Chronic shortage of rental properties is showing no signs of diminishing

Published 6 May 2022

It has been well-documented that demand for good quality rental properties is exceeding supply, and this is having a knock-on effect to those landlords seeking to recover possession of their property for their own occupation or disposal.  The shortage of properties means that tenants faced with a notice for possession from their landlord are finding it increasingly harder to secure alternative accommodation.Catherine Hunt

The lack of supply in the residential lettings market shows no sign of abating, which is something prospective buy-to-let investors should be aware of.

It is striking how many tenants applying to rent homes are doing so because their landlord has decided to sell the property they are occupying. 

There are several reasons that a landlord may decide to sell their property, such as the impact of the looming Energy Performance Certificate rule changes.  They may also consider selling because they perceive that the sales market is potentially peaking.  However, the sales market is similar to the lettings market in that demand considerably outstrips supply - a situation unlikely to be eased anytime soon.

The result of all of this is that it is very much a landlord’s market.  Gone are the days when prospective tenants would make an offer under the advertised rent in exchange for agreeing to a long-term tenancy.  Most tenants are happy to pay the asking price, and on rare occasions some tenants will voluntarily offer more in order to secure a tenancy.

The result is increasing yields more or less across the board, even taking into account rises in purchase prices for investors (rents are generally rising more quickly than property prices).  With many more prospective tenants than there are available properties, the direction of travel when it comes to return on investment looks likely to be one-way for some time to come.

For those who have cash to invest, or who can access finance at the current historically low rates of interest (and almost all commentators agree that rates will have to rise several times in the coming months), now is a very good time to invest, with the ever-present caveat that it is important to buy the right property in the right location - and with the right environmental credentials.

Increases in availability of properties will help tenants who are struggling to find a home, and in turn investors will see decent returns.

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Catherine Hunt

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