Did I Mention Supply & Demand?
For a change, I’d like to say a few words about the behaviour of the market, rather than relating stories about the behaviour of people. The reason is that the rental market is behaving strangely. Although landlords are exiting the sector in droves, there is an overhang of rental properties on the market.
A Shift in Market Behavior – Rising Rents Despite Market Exodus
Even more confoundingly, rents continue to rise. A recent market report claims that 20% of properties for sale throughout the UK had been listed for let in the last three years. This is double the rate from a year ago. There is no doubt that landlords are exiting the sector in large numbers. Of the 39 tenancies ending at Western Lettings’ managed properties in June, for example, 16 of the properties were placed on the sales market.
Potential Causes of Reduced Tenant Demand
So, landlords are exiting the sector, but properties are languishing on the Portals. The only rational explanation is that demand from tenants has reduced. Perhaps increasingly unaffordable rent levels have finally changed behaviour. Tenants are sharing to make renting affordable. Or even living with parents longer. Maybe students are choosing to study in more affordable locations. Some demand is being soaked up by Purpose Built Student Accommodation (PBSA) and Build to Rent schemes.
The Paradox of High Rent Levels
The last piece of the jigsaw is the question of what is supporting such high rent levels. Rent inflation in Scotland for the 12 months to the end of March 24 was 11.5%. To the end of June it was 9.3%. Much of the rent inflation in Scotland over the past few years was driven by landlords looking for ways of hiking rents to avoid rent caps imposed by government. Perhaps, as landlords slowly realise that rent caps are no longer a threat, they will be less afraid of reducing prices to secure tenants.
In which case we may see a reversal of the trend in rent levels. If you have a property to let, please give us a call. We don’t do pushy sales, so you can expect to speak to a friendly and understanding adviser.
