Rental Demand Rockets
Remember last summer, when there were thousands of rooms available but nobody to move into them? That's over. Summer 2021 is very much a case of rocketing demand and 'where did all the rooms go?' So much so that 'room wanted' ads actually outnumber ads for available rooms on SpareRoom for only the third time in the past six years.
It's the same story right across the UK - demand from tenants is dramatically up but supply has fallen. That's generally the case following a spike in rooms, but this year is different. Last summer supply was at an all-time high and demand at an all-time low. Now supply is lower than at any point in almost a decade.
The room rental market has always been a complex dance between supply and demand and we've been in this situation before. However, what makes it different this time round is the number of people coming into the market. Usually some people enter the flatshare market every year and some leave it to rent, or buy. Everyone else moves around between properties, meaning some rooms are taken, while others are vacated. Not this year.
After 18 months of living with the pandemic, renters have had to contend with lockdown (I can't move!), restrictions being eased (should I move?) and lingering uncertainty over jobs and the economy (where should I move to?). Now all that pent up demand is starting to be released back into the market. On its own that wouldnt be such a huge issue, but when you add to that the returning overseas students and workers, and the huge number of young people who moved back in with their parents over lockdown and now want their own place again, and it creates a perfect storm.
We're currently running conducting research into exactly what's driving tenant behaviour right now. We'll give you the full run down on those results once we're done, but early signs indicate very strongly that renters are struggling and it's the influx into the market that's causing it (alongside the lack of supply).
That supply side of the equation is a bit tricker to unpick as it's driven by several factors. Supply usually dries up after theres been a surplus - that's pretty standard. It may well be that those surplus rooms were rented out at the end of last year, or early this year, on 12 month tenancies and aren't vacant again. Plus, many of them will have been rented out at discounted rates to fill them. That's true of many empty rooms over the past 18 months. Some tenants will be sitting tight, happy with more affordable rents.
But that's not the full picture. There's also a lack of confidence in the rental market from a landlord perspective, menaing it's less likely people are investing and expanding their portfolios (and some will be leaving the market altogether).
House prices rocketed earlier this year as the Stamp Duty holiday began to come to an end. On top of that, a severe shortage of tradespeople and supplies, and general uncertainty about the future of Buy to Let (as the government seeks to reform the sector) have left landlords lacking in confidence.
We surveyed 1,471 landlords in September. 44% said they were confident in the rental market, down from 52% in June. But in London those numbers drop drastically. Only 37% of London landlords were confident, down from 38% in June.
So, in a nutshell, if you've got vacant rooms, now's the perfect time to advertise them!
Image credit: Erda Estremera