Rental Price Growth Expected To Surge, Great News For Property Investors

Thursday 17 February 2022

If you were looking for a sign to invest in property, this could be it! With a significant drop in supply for rental properties and an ever-increasing tenant demand, rental prices are expected to keep growing. This is great news for property investors who are looking for strong yields.

A recent study by Capital Economics, commissioned by the National Residential Landlords Association discovered that tenants are facing less choice and higher rents as the availability of rental properties shrink, with nearly 230,000 extra needed every year to match the current demand.

The findings of this study called for substantial investment into the rental market to ensure that a sufficient supply of properties to let is available in the years ahead.

With some landlords no longer increasing the size of their property portfolio and some leaving the market altogether, this has led to a shortage of supply within the rental market. In turn this has pushed up prices as tenants compete for the best homes.

The report suggested the requirement for rental homes could rise to 340,000 every year by the middle of 2022.

Capital Economics suggested that without changes in tax or other policies, the private rented sector stock will decrease by around a further 540,000 properties over the next ten years.

It argued that greater investment in the rental sector would support the overall provision of new housing. This would be through a combination of an increased rate of new builds, the switching of commercial property to residential use, the switching of stock from short-term to long-term lets and bringing empty homes back into use.

It added that while some rental demand is met through build to rent schemes, this remains a small portion of the market. And that landlords remain the largest providers of private rental accommodation.

Ben Beadle, of the National Residential Landlords Association, commented: “Today's report highlights in stark detail the supply crisis now engulfing the sector.

For all the efforts to support homeownership, the private rented sector has a vitally important role to play in helping the Government to achieve its housing objectives.

Without urgent action, the increasing number of people looking for affordable housing will be the ones to struggle as they face less choice and higher rents as supply dries up.”

Andrew Evans, of Capital Economics, added: “The private rented sector, which is predominantly supported by private individual investors, has a key role to play in addressing housing need in the UK.

However, the stock of homes for private rent has fallen in recent years, driven partly by a series of policy changes.

Without further changes, that supply could fall by over half a million more over the next decade. Even with increased provision of affordable housing and higher rates of owner occupation, both of which are important, our research shows that significant additional investment is needed by landlords in the private rented sector.”

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