Joint report suggests activity in lettings market is robust, but rental supply falls

Joint report suggests activity in lettings market is robust, but rental supply falls


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A joint report by Reapit and Dataloft has revealed that the letting market is witnessing significant activity, with viewings up 13.3% year-on-year and lease signings up by 3.9%. Supply, though, has fallen by 6.9%, suggesting an imminent supply-side squeeze is on its way.

The ‘Residential Real Estate Demand Monitor – Rental’ report – a quarterly analysis of the UK’s residential property rental market – combines data from a representative sample of lettings agency branches throughout the UK. It uses previously unreleased data on property viewings, in addition to other demand signals emanating from the rental market.

The findings showed that rents have stayed broadly flat over the past 12 months, with declining supply and increased viewings of the remaining properties available to rent suggesting that there will be a further tightening of supply in the short-term. The shortage of supply, and the increasing competition for homes that results from this, could help to drive up rental prices in the coming year.

The withdrawal of landlord mortgage tax relief, which was announced in 2015 and is being slowly phased out over the next couple of years, has helped to compound the supply issue, with many landlords looking to sell up and exit the market as a result of the cuts. With profits decreasing or potentially compromised, some landlords have been reconsidering their options.

“There are strong market indications that upwards of 10% of landlords are actively considering selling their properties,” Gary Barker, chief executive of Reapit, commented. “Multiple vendors have reported similar information, and we are actively tracking this phenomenon.”

He added: “Our research has uncovered an imminent supply-side squeeze in the rental market. We see strong demand for properties with viewings up 13.3% and lease signings up 3.5% over the year, while overall supply is down 6.9%. Rents are unchanged year on year, but as rental inventory dries up, it’s inevitable that rental prices will increase.”

Barker argued that landlords deciding to sell their properties will further squeeze the supply-side of the rental market, with simply not enough properties to meet demand.

The research also analysed other factors driving rental value, such as a great view. The growth in high-rise apartment construction is delivering rent premiums inside and outside of London, with properties above the first floor commanding a 19% rent premium in the capital and a 6% premium elsewhere. By comparison, there is only a modest 4% premium for a first floor dwelling.

“The vast Reapit databank has enormous potential to add insight to our understanding of residential property market trends,” Sandra Jones, managing director of Dataloft, said of the research.

“The rental sector has been particularly poorly served because there is no publicly available transaction data. So far, we have only scratched the surface of what this data resource can and will deliver in future.”

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