The UK’s private rented sector (PRS) is facing an imminent crisis, according to one of the country’s leading landlords. A significant increase in tenant demand is coinciding with a shrinking supply of available rental properties, leaving many struggling to find suitable housing.
The Mistoria Group recently conducted a survey that involved over 1,500 landlords, tenants, and letting agents. The results were concerning, revealing that nearly half of tenants are living in what is being described as ‘rent poverty’. This indicates a growing disparity between what tenants can afford and the rising costs of rental properties.
Mish Liyanage, the chief executive of Mistoria Group, points to the core issue behind this situation. He explains that over the past 30 years, the number of people depending on the private rental sector has increased by a staggering 132%. Despite some improvements in the tenant-to-property ratio, the reality is that more than two tenants are still competing for every available rental property.
Incentivising landlord investment
He continued by stating that homes are being rented almost immediately after being listed, which has led to increased competition and rising rental prices. He believes that rather than encouraging further investment from landlords, government policies seem to be pushing them out of the market, thereby worsening the existing supply crisis.
Mr Liyanage, a seasoned landlord and property investor, attributes this trend to several government measures. He highlights changes to Capital Gains Tax, Stamp Duty, and the forthcoming Renters’ Rights Bill as key factors that have prompted many landlords to reconsider their position in the market and exit.
Despite these challenges, Mr Liyanage maintains that buy-to-let investing can still be a sound option for those seeking stable, long-term returns. He notes that property investments have traditionally provided annual returns ranging between 8% and 10%, offering both rental income and the potential for capital appreciation over time.
Available rental properties
The current market dynamics, however, present a concerning outlook for tenants. The ratio of private tenants to available rental properties is expected to reach 2.21 by the end of the year. This indicates that competition for rental homes will become even more fierce, leading to higher rents and fewer options for prospective tenants.
This scenario is further complicated by landlords either selling off their properties or downsizing their portfolios in response to the changing regulatory environment. With new policies and regulations on the horizon, landlords are increasingly looking to exit the market.
In fact, more than 56% of landlords have cited upcoming legislation, particularly the abolition of Section 21, as the main reason behind their decision to sell. This shift in the regulatory landscape is forcing many to reassess their involvement in the rental market.
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