Lettings Market Update

Opportunity still exists for buy-to-let investors

• Buy-to-let still represents a potentially strong investment vehicle. With continued high demand and future inflationary pressures easing, buy-to-let can generate a good return.
• Those that continue to invest may focus on buying lower value homes with higher rental yields to deliver profitable income.
• Demand is especially strong in cities, with an average of only 14 days needed to let a property across the UK as a whole.

There are a third fewer homes available for rent than normal and the demand per available rental home has spiked to an incredible 250% above the 5-year average.
Demand for rented homes remains 10% higher than this time last year. Rents will continue to rise ahead of incomes unless there is either a significant increase in rental supply or a strong drop-off in demand, both scenarios that seem unlikely at this point in time.
Looking around the regions, demand varies across the UK but most major cities are tracking above the UK average – for example with Manchester at 14.4%, Birmingham at 10.9% and Bristol at 10.5%. This reflects the attractiveness of urban areas for students and workers alike, more of which is discussed below.

The market is experiencing a combination of factors that are having a profound impact on rental returns. As well as the strong demand discussed above, supply has stagnated, with landlords leaving the market for various reasons and new buy-to-let entrants not picking up the baton in significant enough numbers to offset the loss of property and grow the stock availability.

Demand has been affected by elements such as the needs of international workers and students, whilst there has been minimal net growth in rental stock supply. The latter has been affected by rising costs for landlords, greater legislation and uncertain investment outcomes.

Statistics from the Zoopla Rental Market Report Q1 2023.
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