Number of Landlords Fall as Private Rent Rates Rise

As all advisers will already know, mortgage demand is currently heading for a 12-year low, with high interest rates causing repercussions throughout the industry. This, of course, causes many a headache for brokers looking to find new business and renewals. However, despite these heightened rates, the buy-to-let market seems to be levelling out.

As many people continue to be priced out of mortgages, would-be homeowners are turning their attention to rental agreements to weather out the financial storm.

Buyer Demand Decreases for Eighth Consecutive Month

According to Rics, housing buyer demand decreased for the eighth consecutive month. The inflated market is seemingly becoming the norm, leading to many selecting rental options instead of buying outright.

New buyer enquiries were down at -39% in December of 2022, following on -38% the previous month, continuing in a downward trajectory. The Rics UK Residential Survey also reported that metrics tracking property sales, price trends, and instructions to sell also saw a drop.

The survey concluded, “This downward sales trend became clearer across virtually all parts of the UK over the month, with respondents in the Northwest of England, Scotland, Wales and London all citing a particularly quiet month for activity in our latest results.”

For more on this topic, you can view the complete survey here.

Number of Landlords Stagnating Amid Current Environment

According to research by The Guardian and The Office for National Statistics, private renting rates have been increasing, with five million households revealed to be privately renting in the 2021 census. This has shown an increase of 2.3% since 2011, with the figures climbing from 3.9m to over five million.

The most recent census also revealed that the number of homeowners in the UK had fallen by 1.8% between 2011 and 2021, with many opting to choose social or private renting as a more sustainable alternative.

However, as revealed by the HMRC, the number of landlords has fallen, with many selling their assets amongst uncertainty throughout the market. With harsher tax treatment and the cost of living continuing to increase, landlords face an important decision; whether to cut their assets or weather out the storm, waiting for stabilisation.

As per Hamptons and HMRC, 2022 saw a negative correlation between landlords purchasing property and landlords selling assets. Throughout the year, the number of landlord purchases equated to 167,500; however, there was a total of 205,000 sales in the landlord market. This leaves us with a figure of -37,500 net gain/loss, the most significant fall since 2019.

This means that brokers have an opportunity to grab with both hands, ensuring that they have their landlord clients protected throughout these current events. However, due to more landlords selling their assets, as proven by the statistics above, those sticking to their guns will need necessary insurance to protect their business and property.

Investing Landlords on the Up

Despite overall buyer demand dropping, the number of landlords potentially looking to invest has risen by 9% in the closing months of 2022, as revealed by Hamptons. This information comes as 37% of offers on properties from landlords have been unrivalled by other bids. This stat on competing offers increased from an initial 14% in January 2022.

Rental Rates Causing Ripples

Private rental rates have been increasing since the middle of 2021, with 2022 continuing this pattern. With a consistent rise over the last year and a half, rental prices have significantly contributed to the current cost of living scenario in the UK.

Stats from the ONS have concluded that in the 12 months of 2022, private rental rates in the UK were rising at an annual rate of 4.2%. This is the fastest we’ve seen since the series’ inception in January 2016. Additionally, private rental prices in London were inflating at the fastest since November 2015.

How Brokers Can Capitalise on the Situation

There’s a silver lining to every situation, with advisers identifying a window to ensure that their clients are protecting their assets at such a crucial time. Landlord insurance is the ideal way for many brokers to ensure that their business is safeguarded, maintaining a steady flow of income throughout the heightened climate.

Providing your landlord clients with that peace of mind can ensure that they have their customers at the centre of their responsibilities, a knock-on effect that helps everyone. Additionally, with landlords seriously considering the status of their services, it can be an opportune moment to remind them to invest in buy-to-let insurance. Protecting landlords from potential unnecessary outlay is vital for their business.

At Source, we have a panel of insurers to ensure the right fit for your clients’ needs. To discover more about our offering, take a look at our webpage here.

Alternatively, please contact our broker support team at 02920 265 265 for enquiries, who are on hand to help.

References:

Rics UK Residential Survey

HMRC

Hamptons and HMRC

The Office of National Statistics