The number of available private rental homes has dropped to a 14-year low as landlords continue to exit the market due to rising mortgage costs.
According to consultancy TwentyCi, only 241,000 private rented sector homes were available last month, compared to 370,000 in June 2019 – marking a 35% fall.
This comes as data from Cornerstone Tax 2020 shows that just 1-in-5 (20%) landlords say their investment has been a profitable one, with a further 1-in-5 (20%) admitting that they have lost thousands. As a result, 65,000 rental properties went up for sale in the first three months of 2023, in a move that could aid first-time buyers who accounted for more than one in three sales in 2022.
Zoopla found that the average price of a previously rented home is £190,000, a quarter below the average price of a previously owned house. David Hannah, Chairman of Cornerstone Group International, believes that these properties entering the market will provide more opportunities for first-time buyers but is also set to exacerbate the rental market which is already registering record rents throughout the UK.
This comes as new research from SpareRoom shows that the average cost of renting a room in the UK has risen to more than £700 a month for the first time. The data showed that in the second quarter of this year, the average monthly cost of a room was £704 – 17% higher than in the same period of 2022. The largest increases were in Northern Ireland – up by 20% year-on-year and closely followed by London which increased by 19% to reach an average of £971 a month.
The increase in rents can be attributed to the decreasing supply of rental properties. Buy-to-let mortgages have soared to their highest rate in at least 12 years in a further blow to landlords. The average rate on a two-year fixed-rate buy-to-let mortgage hit 6.96% last week according to Moneyfacts as the Bank of England has warned that tax hikes, soaring interest rates and red tape will force more landlords to sell their properties.
David Hannah, Chairman at Cornerstone Group International said, “I think the rental market is filled with uncertainties at the moment, with rising rents making it less attractive from a renter’s standpoint and rising house prices making it less desirable for buy-to-let landlords to grow their portfolios.
“Our research shows that many landlords were not prepared to deal with the current obstacles facing the rental market as 1 in 5 say they became landlords without the sufficient knowledge needed and have lost thousands as a result.
“As costs escalate and financial pressures mount, buy-to-let landlords are making a calculated move to sell their properties. The sharp rise in expenses, ranging from maintenance and management fees to taxation and regulatory burdens, has compelled some landlords to reassess their portfolios.
“The influx of former rental properties will provide more opportunities for first-time buyers as the average price of a previously rented home stands at £190,000 – considerably lower than the average property price in the UK. However, it will further exacerbate difficulties people are facing in the rental market where record rents are being charged throughout the UK.”