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New research shows increase in landlords selling up

Tuesday 16 October 2018

A new report out shows a range of comparables from Q2 of 2018 compared to Q2 in 2017, such as rental supply and demand, along with data for furnished lets and rental premium for upper floors.

According to the joint report by Reapit and Dataloft, the residential property market intelligence consultancy, the lettings market is seeing substantial activity with viewings up 13.3% year-on-year* and lease signings up 3.5%, while supply has declined 6.9%. 

The ‘Residential Real Estate Demand Monitor - Rental’ report is a quarterly analysis of the UK’s residential property rental market. It combines data from a representative sample of lettings agency branches across the UK. The report uses previously unreleased data on property viewings, as well as other demand signals coming from the rental market.

Although the research shows that rents have stayed broadly flat over the past year, declining supply and increased viewings of the remaining properties available to rent indicates that there will be a further tightening of the supply in the near term. This could drive a rise in rental prices over the coming year.

Compounding the supply problem is the withdrawal of landlord mortgage tax relief, which is encouraging landlords to sell. The tax relief cut, which was announced in 2015, only took effect this year. As a result, landlords are increasingly considering selling their properties as their profits decrease.

Gary Barker, CEO of Reapit explained: “There are strong market indications that upwards of 10% of landlords are actively considering selling their properties. Multiple vendors have reported similar information, and we are actively tracking this phenomenon.

“Our research has uncovered an imminent supply-side squeeze in the rental market. We see strong demand for properties with viewings up 13.3% and lease signings up 3.5% over the year, while overall supply is down 6.9%. Rents are unchanged year on year, but as rental inventory dries up, it’s inevitable that rental prices will increase.

“Landlords deciding to sell their properties will further squeeze the supply-side of the rental market. There are simply not enough properties to meet demand.”

Some of the findings from the new report echo our own research. For example our ARLA Propertymark August PRS report shows that on average four landlords per branch decided to sell up in August alone, with similar results the previous few months too. 

The research looked at other factors driving rental value, like a great view. The growth in high-rise apartment construction is delivering rent premiums inside and outside London. Properties above the first floor command a 19% rent premium in the capital and a 6% premium elsewhere. This compares with a modest 4% premium for a first floor dwelling.

Sandra Jones MD of Dataloft commented: “The vast Reapit databank has enormous potential to add insight to our understanding of residential property market trends. The rental sector has been particularly poorly served because there is no publicly available transaction data. So far, we have only scratched the surface of what this data resource can and will deliver in future.”

The next report will be released early January 2019.

*The Residential Real Estate Demand Monitor compared rents in Q2 2018 to rents in Q2 2017 to calculate the year-on-year percentages.

Download the full report