Buy-to-let investors continue to experience extremely high levels of demand for their properties
The UK rental market has an imbalance between supply and demand, with fewer properties available than people seeking homes. The good news for buy-to-let investors is the continuation of extremely high demand for their properties, with new data indicating another rise. For buy-to-let property investors, the UK housing market has several positive markers right now. Resilient pricing and mortgage rates finally edging back down after recent increases provide a favourable environment.
Rising rental demand
Alongside these factors, rental demand remains extremely strong across almost all parts of the country, with the number of tenants far exceeding the number of available homes. The report shows the average number of new prospective tenants registered at each member branch has risen to 97 in May, up from an average of 90 in April, representing around a 7% increase. This suggests that tenant demand in the UK buy-to-let sector is rising.
Increasing stock levels
At the same time, buy-to-let stock levels have increased to around 11 rental homes available per member branch in May. Although this remains within long-run parameters, it highlights a significant disparity between tenants seeking homes and the available properties. On average, about nine new tenant applicants are registered for each available property as demand continues to outstrip supply.
Tenancy agreements and rent trends
The number of tenancies agreed per branch also increased in May to just over eight, having fallen to a lower point over the past few months. However, this figure is still down from the middle of last year, when the average was around 11 new monthly tenancy agreements per branch between July and October. This imbalance has had a knock-on effect on rents, pushing upwards over the past couple of years partly due to escalating mortgage rates and changes to tax rules.
Fluctuating rental rates
According to the report, rents “continue to fluctuate by market and region”. Almost half (47%) of member branches reported seeing rents remain static this May, while 34% said they had increased overall. Conversely, 18% said they had seen rents fall month-on-month, up from 12% who reported the same in April.
Rental arrears and market outlook
Rental arrears for buy-to-let landlords remain towards the lower range, despite a slight increase in May, with less than 3% of fully managed and rent collect/rent management properties in arrears. Buy-to-let property investors will also keep a keen eye on the sales market, particularly with the promise of a future base rate cut and more positive economic influences expected to boost the housing market, including the buy-to-let space.
Ready to explore your buy-to-let funding options?
For more detailed insights or to discuss your mortgage and property investment needs, please do not hesitate to contact us. We are here to assist you with expert advice and guidance in navigating the dynamic buy-to-let market. For more information, speak to our specialist team here.
Please note: this is a long term investment which you hope will generate rental income along the way and a profit when you sell the property, but bear in mind that if you need access to some cash, a property can take time to sell or remortgage. If house prices fall, you might not be able to sell for as much as you had hoped. You would have to make up the difference if the property sold for less than you owe – a risk that increases, the higher the percentage you borrow. If you sell for a profit, you may have to pay capital gains tax. Don’t forget that with a variable rate mortgage, your costs will rise if interest rates go up. This would eat into, or even wipe out, your income and profit. It is recommended that you also maintain access to emergency funds to cover your mortgage payments during ‘void periods’ that may arise whilst you have no tenant and the property is not let. Please also note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
