Imagine if there was no property rental market! If there were no houses and flats to rent at all. And no houses and flats for letting agents to rent, or to manage. Here we’ll look at if, with the current changes in the property market, that could actually happen.

The private rental sector has been a popular way of finding a home for a few decades now. So it is easy to forget that in the scheme of things it is a fairly new development. Many tenants (and agents) today won’t remember the days before private rentals were relatively commonplace.

Assured shorthold tenancies only came into being in the Housing Act 1988. Buy to let mortgages were only generally available from 1996. Both these things made private rentals more practical and more financially viable. The types of tenancies that existed previously were not that attractive to private landlords, nor were buy to lets easy to finance. These factors meant that privately rented property was scarce – if it was available at all.

Could those days return? In the not too distant future could there be no rental or lettings market to so speak of anymore?

Let’s look at the fundamentals which point in that direction: Buy to let has become a popular opportunity in recent years due to attractive property prices and the attractive rents and yields that landlords can earn whilst also being a fairly simple-to-run business.

But it’s not so easy anymore. Buy to let has become more expensive to get involved in. More rules and regulations have made it a more complicated business to run.

These factors already seem to have had an impact on the market. Some landlords have decided to sell up. Encouraged partly by the sudden rise in property prices and the money they can make by selling perhaps. Others have decided to hold off investing in new properties.

This report suggests there is an impending rental market crisis. On average there are 28 potential tenants for every property that becomes available to rent. In some areas, agents only have a handful of rental listings – and some even none at all.

So does that mean the rental market is disappearing? That in future there will be no homes to rent? And no lettings market for letting agents?

Maybe, or maybe not!

Again, let’s look at the fundamentals. Buy to let is about the financial ‘numbers’ at the end of the day.

Recent changes in the property market including soaring house prices, a shortage of rental properties and cost of living rises seem to be pushing rents up. While that’s not good news for tenants it is better news for landlords, as it tends to suggest that yields can and will rise too.

This report says that at the moment private rents are rising at the fastest rate for five years.

According to this report yields are now the highest they have been for six years.

So potentially more landlords could be tempted back into the market over the next few years. That could be especially the case if, as many experts believe, the rate of property price rises falls.

Another factor to consider is the rise in build to rent. Build to rent is a concept where large investors fund, develop and operate new house and flat developments solely as rentals. Build to rent is being backed by some very large investors and benefitting from billions of pounds of investment right now.

Recent data suggests build to rent could grow to 20% of the new build market. That could add thousands of new rental homes every year.

So to summarise what’s the outlook for the private rental market?

Some local areas where homes are in short supply anyway could very well see an even worse shortage of private rentals. On the other hand it could see a bit of a boost over the next five years or so. Some areas could see a surge in build to rent properties becoming available. So almost certainly it isn’t going anywhere. But most likely the rental market will change considerably.

Other key factors to affect the market over the next few years will be further rises in interest rates and the progress of the Renters’ Reform Bill. Both these factors could affect the supply of rental property in the years ahead.


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