David Hannah, Group Chairman of Cornerstone Tax, comments on the current state of the rental market in the United Kingdom and what can be done to encourage young people to get on the property ladder.

Fresh data from Propertymark has found that around ten new prospective renters registered for each available property in February.

As demand continues to outstrip supply in the rental market, our own figures suggest that almost one-in-five tenants have lost out on a property due to a bidding war in the past two years, with regional disparities exacerbated in London, Brighton, Southampton and Manchester.

The flurry of legislative attention surrounding the rental market, including the proposed abolition of no-fault evictions, provides a positive step in the right direction but falls short of the long-term solutions

The flurry of legislative attention surrounding the rental market, including the proposed abolition of no-fault evictions, provides a positive step in the right direction but falls short of the long-term solutions needed to make the UK’s property market attractive for both landlords and tenants alike. According to research undertaken at Cornerstone, 15 per cent of landlords are considering selling up due to the rising costs associated with their property, with the average landlord losing £7,500 amid sky-high mortgage rates and unfavourable tax burdens. The exodus of landlords across the country has been a direct contributor to the current supply and demand imbalance, perpetuating a vicious cycle where tenants across the country continuously lose out. 

Many landlords took out mortgages on buy-to-let schemes during a period of sustained low interest rates.

Many landlords took out mortgages on buy-to-let schemes during a period of sustained low interest rates. Fast forward to 2024 and the pressure currently facing landlords is simply too much. Spiralling interest rates and the highest tax burden since the second world war have forced thousands of landlords to sell up, which then puts further pressure on renters due to a lack of stock.
 
It’s unfortunate that many renters from across the country now feel the need to jump through multiple, previously unnecessary hoops to secure a rental property – the Government’s proposed Renter’s Reform Bill would undoubtedly relieve the stress of many tenants, but I’d argue that policymakers ought to be assessing the root causes of the current rental market turmoil.
 
Last month’s major headline was that the rate of inflation had fallen dramatically to 3.4%, that should have been the signal for the Bank of England to begin looking at cutting the interest rate in order to inject short-to-medium term optimism into the UK housing market. Despite this, interest rates remain at 5.25% and will continue to do so until the BoE’s next major decision.
 
Whilst it’s positive to see many of the UK’s major mortgage lenders slashing their rates, with the effective rate of interest falling to 4.9%, the dream of home ownership remains a pipe dream for many. What’s needed going into 2024 is a commitment from the BoE to prioritise first-time buyers by signalling further cuts to the interest rate.

Despite the current spate of chaos in the rental market, hope may be on the horizon for prospective first-time buyers. Last week’s data from Zoopla found that home sellers are typically slashing their original asking price by upwards of £10,000 – an average discount of 3.9%. Moreover, new data from the Bank of England has revealed that mortgage approval rates are now at their highest level since 2021 –  a result of a price war between major lenders in late 2023.