Goodlord and Vouch, two key players in the rental market, recently released their comprehensive “State of the Lettings Industry” report. This annual study, now in its sixth edition, gathers insights from:

• Over 2,000 letting agents, landlords, and tenants.
• Regions across England, Wales, and Scotland.
• A broad spectrum of more than 100 topics.

This report presents an on-ground view, especially after prolonged media debates around tenant demand and landlord decisions.

Rising Tenant Demand vs. Shrinking Property Availability

Over the past year, a significant 78% of letting agents observed a spike in tenant demand. Conversely, 58% of agents noted a marked reduction in available rental properties. The reasons behind this imbalance include:

• Landlord Decisions: 76% of agents cited landlords selling properties or reducing their portfolio as a key factor.
• New Entrants: 59% felt that insufficient new landlords entering the market added to the scarcity.
• Tenant Choices: 51% believed it’s because more tenants are opting to continue renting rather than purchasing homes.

This has repercussions for tenants. A notable 76% of tenants who moved between July 2022 and July 2023 struggled to find a property. Additionally, 13% ended up paying a higher monthly rent than initially advertised.

Finding the right rental property isn’t just a logistical challenge; it’s a significant stressor. A whopping 73% of tenants deemed the property hunt as one of their most stressful life experiences.

Landlords’ Perspective and Choices

The trend of landlords exiting the market is evident:

• 95% of letting agents witnessed at least one landlord selling a property.
• Nearly a quarter saw up to 20% of their landlords selling a property.
• 30% of landlords put a property up for sale, with an additional 17% considering the move in the coming year.

Financial and economic reasons seem to be at the core of these decisions. Both agents (82%) and landlords (70%) attribute property sales to:

• Rising mortgage rates.
• Changes in taxation.
• Increased costs.
• More lucrative investment opportunities outside the sector.

The looming Renters (Reform) Bill also plays a role. 55% of agents and 56% of landlords see it as a push factor, with many apprehensive about the proposed ombudsman introduction and energy efficiency standards.

The Regulatory Landscape

While the government has delayed certain rules around Minimum Energy Efficiency Standards, 78% of agents believe the current plans will negatively impact the private rental sector.

In fact:

• Two-thirds of landlords reveal half or fewer of their properties meet current energy standards.
• Many are uncertain or delaying improvements, while 23% consider selling non-compliant properties.

Despite these challenges, agents remain optimistic. 74% feel equipped to navigate regulatory changes, whereas only 44% of landlords share this confidence.

Financial Pressures on Tenants

With the average rental price in England rising by 10% in a year, financial stress for tenants is palpable. Despite 71% feeling their income is secure:

• Only 30% report no issues with rent payments.
• 39% consider rent payments as their top concern.
• 63% aspire to own a home but are held back by hefty deposits.

Interestingly, arrears rates remain largely unchanged. To mitigate risks, landlords are increasingly seeking guarantors, with 16% mandating them regardless of tenant salary.

Concluding Remarks from Industry Leaders

William Reeve, CEO at Goodlord, highlighted the significance of this extensive report, stating its role in understanding landlord hesitations, tenant anxieties, and agents’ preparations. Tom Goodman, MD at Vouch, emphasized the silver lining, urging letting agents to view legislative changes as opportunities to showcase their value.

Wrapping Up

As the UK rental market continues to evolve, the balance between tenant demand, available properties, and landlord decisions becomes pivotal. For prospective property investors, understanding these dynamics is essential to make informed decisions.