Miles Shipside, director of Rightmove, says:
“Letting agents in many areas are reporting an insatiable demand, with prospective tenants coming from all backgrounds and requiring all types of property. Those traditional tenants that are leaving the family nest are increasingly being joined by those that can’t sell or get a mortgage to trade-up, putting unprecedented pressure on the rental sector of the housing market to provide homes to rent on most rungs of the property ladder.
"Such demand inevitably creates supply shortages and pushes up the cost of the rented roof over the tenant’s head. In spite of the country’s economic hardship, the desire or need for suitable accommodation is set to further test the elasticity of tenants’ purse strings”.
The proportion forecasting higher rents 12 months from now is at the highest level Rightmove has measured since the Consumer Confidence Survey began in January 2009, and coincides with the smallest proportion recorded suggesting lower rents . The 53% predicting upwards movement has jumped from 42% in the previous quarter, and now outnumbers the 4% predicting lower rents in their area by 13 to 1.
The proportion of those expecting rental price levels to be stable has consequently fallen to 37%, down from 45% in the previous survey. Available rental stock advertised on Rightmove on a national level is down 18% compared to a year ago, with the most acutely affected regions being London and East Anglia where stock levels are down 24% and 19%
Shipside comments: “The days of plus 70% owner-occupation are numbered, with the lenders who hoisted us up to these levels now responsible for opening up a trap door beneath our feet, leaving the housing aspirations of many dangling by the precariously thin thread of mortgage supply. The 13 to 1 ratio of tenants expecting rent rises rather than falls is unlucky for renters, but not for their landlords”.
A key characteristic of the current rental market is the demand from ever greater numbers of tenants, driven by the emergence of new groups appearing in the already crowded rental sector.
Rightmove’s research has charted a ‘Top Five’ of tenant groups:
1. The Low Equity Ensemble: Lenders’ high deposit requirements and appetite for lower risk lending portfolios mean home-ownership is out of the equation for many, pushing them into the rental sector. 44% of tenants say size of deposit is the biggest reason for not buying;
2. The Job Jittery: An emerging trend hitting harder in the north than the south – twice as many would-be buyers in some northern regions citing employment concerns as a reason to rent and a deterrence to buy, compared to the south;
3. The Wait and See Brigade: Concerns over the possibility of falling prices and rising interest rates means they hedge their bets by renting for now
4. Limbo Landlords: Owners who choose to let out their existing property and rent an alternative because they are unable or unwilling to sell to fund their next purchase – though they ‘supply’ and ‘demand’ and so the net effect on the market is neutral;
5. The Lesser-spotted Landlord: Tighter lending criteria has caused a shortage of most buyer groups, including new landlords. Only 12% of those who intend to buy in the next 12 months say they plan to rent it out, compared to nearer 17% just two years ago.
Shipside adds: “With lenders not singing the same tune as many hopeful property purchasers, housing aspirations are like a broken record, continuously stuck in the groove of high deposit requirements, rising rents and challenging economic factors. The result is an over-crowded and increasingly under-stocked rental market. Aware of these conditions, the majority of today’s renters are expecting further increases in rental prices for the year ahead.”
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