The latest data from online property portal Zoopla has shown that the majority of landlords who have opted to leave the buy-to-let market in the last three months have been concentrated in the South East and London where rental yields are lowest.
Despite this, Zoopla has said talk of a ‘landlord exodus’ is overdone and while its sales data continues to show a steady, constant flow of private landlords selling up, there has not yet been an acceleration of the trend.
It noted that there continues to be new investment in rented homes, mainly from corporate and institutional landlords with the net result being no change in the number of private rented homes since 2016.
Zoopla’s latest rental market report released today (June 20) took a look back on rental market trends from April to June this year.
The data showed that rental inflation ran in double digits for a 15th consecutive month in May, while there is emerging evidence of growing stress for renters on lower incomes.
Zoopla’s executive director, Richard Donnell said the “relentless” increases in rent that tenants are dealing with are compounded by wider cost of living pressures, making home moving decisions even more challenging, especially for single people and those on low incomes.
A key cause of this is the continued imbalance between supply and demand which Donnell noted continues to push rents higher.
The report stated: “Rental inflation will only slow if we were to see a material increase in supply or weaker demand.
“The latter seems unlikely given rising mortgage rates impacting first time buyers, the strength of the labour market, high immigration and upcoming busiest period for rental demand – between July and September.”
According to Zoopla, the level of homes for rent remains 20 to 40 per cent below pre-pandemic levels in most regions, which means more renters chasing fewer homes, adding extra impetus to rental inflation.
However, Donnell noted that increasingly stretched affordability will start to reduce the pace of rental growth into 2024.
Mortgage chaos
Addressing the recent spike in mortgage interest rates, the Zoopla report noted that 62 per cent of landlords have used borrowing to fund their properties.
Of these, it said those with loans worth more than 50 per cent of the property value will be hit the hardest.
This accounts for 30 per cent of all rental properties, according to Zoopla’s analysis of statistics from the Department of Levelling Up, Housing and Communities.
“The real pressure of higher mortgage rates on landlords hits the 20-30% with the highest loan to value mortgages where landlords may need to inject extra capital when they refinance or look to sell,” Donnell said.
“While there is concern over the impact of higher mortgage rates on those with mortgages, renters have already seen a £2,820 a year increase in rental costs over the last 5 years.
“Some renters are experiencing more stress from higher rents with a jump in those finding the rent difficult to pay,” he added.
According to recent ONS Opinions and Lifestyle Survey data, 53 per cent of renters have been hit with a rent increase in the last six months. This was up from 53 per cent in the previous six months to November 2022.
Zoopla noted that a small but growing number of renters are falling behind on their rent - 8 per cent compared to 4 per cent in the previous six months.
“Landlords will need to support renters and manage rising arrears. Higher rents are manageable at this stage for many, but this will vary across markets,” the Zoopla report stated.
Last week, FTAdviser reported that as the average buy-to-let fixed-mortgage rate edges further above 6 per cent, many buy-to-let investors are now confronted with the choice of increasing rents or selling up.
jane.matthews@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
