Sarah Coles, personal finance analyst at Hargreaves Lansdown, discusses the RICS Residential Market Survey for August, released today.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, comments:
“Millions of renters saw their financial resilience exhausted by the pandemic, so they have nothing left to get them into the race for rental property. With prices rising and properties being snapped up, they could find themselves struggling to find a place to live.
Generation rent has been hit particularly hard during the crisis. Figures from the ONS earlier this year found they were far more likely to have had their finances affected by the crisis than owners or mortgagees. They were also more likely to have borrowed money to make ends meet, and those who were already in debt were more likely to have borrowed more. The pandemic pushed the finances of many of them to breaking point, so a hike in rental costs is the last thing they need.
Prices have been pushed up by a combination of a boom in demand and a slide in supply. Lockdowns have forced renters to reconsider how they live. More people breaking away to find a place of their own and a bit more space means demand has begun to accelerate.
At the same time, some landlords are cashing in on house price rises and selling up, while others are switching to holiday lettings, so the available stock is falling too. The number of rental properties coming to the market has dropped relentlessly over the past 12 months.
This is pushing rents up, and agents expect them to go even higher. One agent reported that he can easily get 60 potential tenants clamouring to see a property. Tenants are getting into bidding wars, and RICS is predicting annual rises of 2.5%. While this is well below the pace of house price rises, it will hit renters harder, because they can’t take advantage of falling mortgage rates.
It’s not just higher rental prices tenants have to worry about either. Properties are being snapped up at speed, and Landlords can afford to be choosy. You need to be armed with the best possible references and have a spotless payment record, or you will lose out. It means that anyone who had to ask for help from their landlord during the crisis could find themselves struggling to find a new place to live.”