The price surges are being seen across the world. Recent data from the Canadian apartment rental market highlights this. Boardwalk REIT, who offer over 30,000 rental units across Canada, confirms booming demand for apartments. This has pushed prices up on average 5.6% from the previous year. Among some of the highest increases, Kitchener (Ontario) and Calgary (Alberta) have seen an increase of 7.2% and 6%, respectively, from the previous year's levels. This represents one of the highest increases YOY in the last 30 years.
The rental market is booming with no sign of cooling off, causing a widening supply and demand issue across the UK. But will this shortfall cause rents to increase even more?
Finbri, a bridge loan broker, explains, "Average rental prices could rise by another 4.5% throughout 2022,. If developers were able to fix the supply-and-demand imbalances by increasing housing stock, then that may dampen the steep hike in rental prices across the UK. Over the last decade however, no government intervention has been seemingly able to address the imbalance, so it seems for the foreseeable we'll see rents increasing."
According to Goodlord, a recent study found that between the 8th July and the 19th July 2022, tenancy applications were up 22% compared to the same period last year. The analysis also shows that despite predictions that soaring temperatures would cool the rental market, it has, infact, continued the upward trend.
How does shortfall affect rental prices?
The widening supply-demand imbalance is causing rental prices to soar higher and higher.
Rightmove reports that average asking price for rents outside of London has reached £1,126 per calendar month, up 3.5% from last quarter and 11.8% from last year.
This increase in average rental prices is the largest that Rightmove has ever observed in 16 years of reporting. Since the pandemic began two years ago, rents outside of the capital have climbed 19%, or £177 per month.
What is causing the supply-and-demand imbalance?
What could be the cause for this continued imbalance?
Tenants staying in rental properties for longer
According to research, tenants are now spending more time in their rental houses. On average, renters lived in their homes for 21 months in February, but this jumped to 23 months in March. With so little inventory, potential buyers and movers have few options, making transferring simply prohibitive for the vast majority. As a result, the lack of the regular rotation of properties introduced to the market simply serves to exacerbate the problem.
Tenant demand reaches an all-time high
The proportion of landlords reporting an increase in tenant demand is now at 62%, the highest percentage since 2011. A recent survey, featuring over 700 landlords in the UK, said the majority (34%) saw a significant increase, followed by 28% reporting only small increases.
What does this mean for landlords?
With changes in tax legislation and the increase in stamp duty surcharges, many landlords are losing confidence in their ability to make a sustainable profit margin and are considering leaving the rental market altogether.
Propertymark noted that on average, two to three landlords were selling their properties per branch, from February to March, an increase from 2 in February.
For a region that is normally struggling, 84% of Central London landlords reported an increase in demand in Q1 this year, up from just 12% in the same period last year. Such surge in demand makes the private rental sector a more-than-worthy investment consideration.