Rental price growth set to ease

Rightmove’s first Rental Market Forecast of 2013 finds that the property supply shortage that has plagued the rental sector in recent years looks set to ease this year as more private landlords prepare to invest in the buy-to-let sector.


An increase in landlords – from experienced ‘professional’ landlords to ‘virgin’ landlords investing for the first time – is likely to have a cooling-effect on rental price growth, much to the relief of beleaguered tenants.


Miles Shipside, director and housing market analyst at Rightmove comments:

“Buy-to-let investors, attracted by evidence of sustained demand and strong yields, will provide much needed supply relief to ‘Generation Rent’.  A marketplace where landlords are achieving satisfactory returns will relieve some of the supply pressure in 2013.”


Landlords are attracted to invest by a combination of sustained demand and attractive yields. The proportion of ‘trapped renters’ – those tenants who state they would like to buy but can’t afford to – remains stubbornly high at 53%. They are joined by a growing proportion of tenants who state that they are not interested in buying as renting suits them. This group now stands at one in six (16%), the highest level ever recorded by Rightmove. In addition, those tenants who expect to stay in rented accommodation for three years or more has jumped from 32% in last quarter’s survey to 37% this quarter.


Shipside notes:

“In locations where property prices have fallen substantially or rents have risen more dramatically, landlords have invested and many seem willing to invest again. Some higher priced areas remain unattractive to the hard-nosed investor or risk-averse lenders. Those areas will continue to see the supply of rental property outstripped by demand putting further upwards pressure on rents. However, overall greater supply of rental property coming on tap is good news for tenants as it is likely to lessen the pace of rental growth in 2013.”


Separate investor research by Rightmove shows that 74% of professional landlords also intend to add to their rental portfolio in the next 12 months, giving a much needed boost to the available housing stock. As well as existing landlords adding to the rental stock supply, the proportion of ‘virgin landlords’ intending to purchase a buy-to-let property for the first time in 2013 is now at its highest level for more than a year.


Shipside adds:

“While the cavalry charge from major institutions seeking to invest in the private rented sector has so far failed to materialise, private landlords, whether accidental, virgin or professional, are perhaps enjoying the respite and seizing the opportunities that come with having the battlefield to themselves.”

Click here to view the full report.


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