Buy-to-let Property Shortage: Impact on Tenants and Landlords

Letting agents are posting sold-out signs across the country as private tenants queue to rent scarce buy-to-let homes.

In London, 40,496 homes are available to rent - just four per cent of the capital’s buy-to-let stock of just over a million properties.

Research from letting agent Benham & Reeves prospective tenants in some boroughs have few homes to choose from.

“The chances of securing a rental property in some parts of London are non-existent,” said a spokesman for the firm.

Meanwhile, separate research from consultancy Twenty Ci reveals the number of buy-to-lets available to let nationwide has plunged by 35 per cent - from 370,000 in June 2019 to 241,000 last month - and is expected to shrink further as mortgage affordability falls away for landlords.

Fewer homes for higher rents

Average buy-to-let mortgage rates have climbed to 6.9 per cent for a two-year fixed rate deal this week, up from 6.6 per cent the week before.

Chief customer officer Colin Bradshaw said: “The yield position on any asset you own where it’s mortgaged is likely to be severely eroded.

“Availability is reduced, and affordability is down. There are fewer properties, and they cost more. That’s not great for renters.”

And as housing stock has evaporated, rents have continued to rise and are 23 per cent higher since 2019.

However, buy-to-let is a tale of two markets.

London: A tale of two cities

Availability for premium homes renting for £3,000 a month or more has increased by 41 per cent since 2019.

But renters who can only afford up to £800 a month in rent have seen stocks plummet by 32 per cent in the past 12 months and by 65 per cent since pre-pandemic.

The Benham & Reeves study disclosed more homes to rent were available in the more expensive inner London boroughs.

Camden (10%), City of London (11%), Kensington and Chelsea (12%) and Westminster (12%) all had at least one-in-ten rental homes available for tenants.

But more affordable outer boroughs like Havering, Bexley, Redbridge and Croyden had two per cent of available buy-to-let stock ready for new tenants.

Barking and Dagenham had just 180 out of 16,525 rental properties available.

Mixed fortunes for London tenants

In London, tenants have mixed fortunes. Although the number of homes to rent is low, the total of properties available is higher than in the past 18 months.

Source: Benham & Reeves

37 tenants vie for every rental

Benham & Reeves director Marc von Grundherr said: “The London rental sector has been on fire and is buckling under the pressure of enormous tenant demand.

“A return to normality has seen increased activity from professionals, students and foreign renters, which have caused stock levels to plummet, making it difficult for new tenants to find and secure a property.

“We’re seeing an average of 37 applicants for every available rental property.

“At the same time, landlords have seen a fourfold increase in their mortgages, which will result in higher rents; otherwise, landlords will have to exit the sector. If they do, even less stock to meet demand will push up rents.”

Adding to the mix, buy-to-let mortgage lender Landbay predicts 36 per cent of landlords expect to sell at least one rental property over the next 12 months.

The deciding factor, says the lender, is rising interest rates.

Around 45 per cent of landlords claimed their rents do not cover mortgage repayments. In comparison, 47 per cent are worried about paying increased taxes, and 40 per cent are concerned about the costs of funding energy efficiency improvements.