Demand for rental properties jumped for the second consecutive month in June, reversing months of decline, as demand continued to pivot, at least temporarily, from the sales market to renting amid geopolitical and economic tensions. Our data indicates that rising demand, falling supply of properties and also an ‘untended consequence’ of the Renters’ Rights Act, have restoked rental inflation.
Portal enquiries – the first stage in tenants seeking properties – rose by 10% YoY in June, following a 17% increase in May. That reversed five monthly YoY reductions in portal traffic. The strong recovery in lettings enquiries compares with a 20% fall in our parallel sales market survey for June, providing evidence of would-be buyers deferring decisions during the current economic and political turmoil.
The increased demand has occurred after a long period of falling supply of rental properties – exacerbated by years of rising taxation and regulation of landlords, which culminated with the Renters’ Rights Act (RRA), which came into force on 1 May. However, our data indicates that one requirement of the Act may have actually led to landlord raising their asking rents, to ‘test the market’.
The Act bans landlords from charging tenants above their initial asking rents. However, in May, the first month under the RRA, there was a sharp YoY fall, -36%, in the number of landlords cutting their rents – following several months when there were increases in the proportion making reductions.
There was a partial reversal of this trend in June – a 6% Y/Y increase in the number of reductions – as some properties remained vacant following the big, possibly one-off increase.
Katinka Hill, Head of Lettings at Chestertons: “Landlords have reacted to the Act by increasing the initial marketing price of their properties, to give themselves some leeway as they cannot accept over the asking rent due to the act. Tenant demand across London continues to be resilient, with high levels of enquiries demonstrating that people are still actively looking to move. Prospective tenants are ‘shopping around’ more, taking more time to compare properties and make informed decisions, resulting in a more considered search process. For landlords, the focus is increasingly on getting the asking price right from the outset to attract the strongest level of interest. Well-priced, well-presented properties continue to let quickly and we’re encouraging clients to remain responsive to market feedback where necessary”.
The increase in demand comes against a backdrop in falling supply. Zoopla estimates the supply of rental property across the UK has declined by 23%. However, according to Hill, “More recently, we are seeing landlords come back to lettings while the sales market is slow”.