Is this a good sign for landlords and rents ? Supply drops and demand increases

An article in Landlord today on Friday 26th September shows that :

Renters fight for property as supply drops and demand increases  

Tenants looking to rent will face fierce competition for privately rented residential property as demand among tenants’ increases and supply contracts, according the Association of Residential Letting Agents (ARLA).

ARLA’s third quarterly report found that over a third (68%) of respondents reported more would-be tenants than properties available. This figure represents the third and biggest successive increase, from 46% in Q3 2013, 54% in Q1 2014, 59% in Q2 2014; meaning an increase of 9 percentage points between Q2 and Q3, and the largest increase since numbers were on the up.

This is reinforced by the fact that supply of residential property on the private rental market decreased in the last quarter, with ARLA members recording a 6% drop in the average number of managed BTL investment properties on their books, from 143 to 135 per member agency.

Stock levels are only going to continue decreasing, as members reported that the number of landlords investing in BTL property shrunk by 8 percentage points in the last quarter, from 35% to 27%. At the same time, the number of landlords selling their BTL property increased by 5 percentage points, from 27% to 32%. As a result, the relationship between buying and selling BTL investments has reversed, with landlords selling property now exceeding landlords buying property for the first time in four years.

David Cox, managing director at ARLA, said: “This quarter, we have seen demand for properties in the rental sector significantly rise, while the supply of residential rental properties has dropped. This activity has bucked the seasonal trend recorded over the past 11 years for this quarter, in which we normally see an increase in the number of new tenancies signed up. However, with landlords not investing in new BTL property tenants are finding it increasingly difficult to secure contracts.”

Whilst the overall property stock is down, some ARLA Licensed members reported that a large proportion of BTL properties that were put up for sale have since come back onto the rental market, after landlords’ bids to sell had been unsuccessful. The number of these properties coming back onto the lettings market rose from 9% to 16% in the last quarter.

There is some good news when it comes to tenants in the private rented sector; tenants have been wising up and taking responsibility as members saw an increase in tenants requesting references on potential landlords from lenders, with the figure rising 2 percentage points, from 7% to 9%.

David Cox adds: “It’s great to see an increase in consumers making an active play to check that their landlords are financially viable. Renting a property and laying out considerable finances is a big commitment, and it is important that consumers ensure they are protected. By choosing to rent through an ARLA licensed agent or landlord, tenants’ money is not only guaranteed by a client money protection scheme, but tenants are also given peace of mind that any issues can be dealt with in a professional and safe manner by a qualified agent.”