Shocking statistics have emerged from a survey of the private rental sector, with the Savills agency claiming there are still 31% fewer properties available to rent in suburban areas than there were in 2018/19.
And across the entire UK, the agency says that analysis of HM Land Registry data shows that last year 5.4 homes were sold by landlords to owner occupiers for every one home bought by landlords from owner occupiers, a 5:1 ratio. This is a much faster rate than as recently as 2021, where the ratio was around 1:1.
And the agency adds that all available evidence strongly suggests that small individual landlords are selling their rental properties.
The Savills study goes on to say that a record 26% of landlords sold at least one property in 2024 while just 8% of landlords bought. And the 2024 English Private Landlord Survey (EPLS) suggests more sales to come based on the profile of landlords.
The median age of a landlord is 59 and more than half (53%) have been landlords for over 11 years. The most cited reason for being a landlord is long-term investment to supplement pensions, and many landlords have enjoyed substantial capital appreciation while invested. But the report warns: “Some are now looking to realise these gains as they approach retirement.”
The study hints that while the decline of buy to let has accelerated sharply in the past two years, it’s actually been a long-term trend – albeit at a slower rate.
From 2010 to 2018, the share of homes owned by landlords with just one property halved (40% to 20%) while those with two to four properties, five to nine properties, and 10 to 24 homes all grew their share considerably, according to the EPLS.
The market continued to consolidate from 2018 to 2024, as landlords owning between five and 24 properties increased their share of the market from 33.0% to 35.4%, an extra 153,700 homes.
Savills continues by saying that a shift to larger portfolio sizes is also evident in mortgage data. Between 2018 and 2024, the average number of properties per mortgaged landlord grew from 3.2 to 4.5, according to UK Finance.
The study goes on to show that the shortage of supply has directly led to an increase in rent.
It says: “With a lack of supply and elevated demand, the inevitable consequence is high rents that are growing strongly. At no time was this more evident than the years following the pandemic when demand surged across England and there were fewer properties available to rent on property portals.
“This peaked in February 2022 when there were 30% fewer listings per letting branch compared to the 2018-19 average. This led to a corresponding increase in average rents, which grew at a peak rate of 12.2% in the 12 months to July 2022.”
Separately, Savills has joined forces with two other major organisations in the world of corporate letting – L&G, and the British Property Federation – to claim that Build to Rent is “a crucial solution” to the overall rental shortage although they admit the sector must accelerate its growth to meet increasing demand.
Over the past decade, BTR has delivered 130,000 new rental homes. However, there remains a notable gap between new institutional supply and sales by small landlords. This highlights the need for enhanced policies that support institutional investment.
The organisations say local authorities have a significant opportunity to address this by supporting rented stock in their Local Plans, thereby boosting supply.
Institutions and large professional landlords can play a crucial role in adding new rental supply as small individual landlords divest, notes the research.
Guy Whittaker, Head of Build to Rent Research at Savills, says: “There is an urgent need for greater investment in the Private Rented Sector. It’s clear that the sector will not be able to rely on individual ‘Buy to Let’ landlords alone to house the renters of tomorrow, as it did for the past two decades. The market is consolidating, as rental homes switch hands from small to large landlords.
“Our report has identified that housing need is particularly pressing in suburban markets which continue to experience significant supply shortages. Institutional investors have an important role to play in replacing homes lost from the rental market, meeting growing demand for rented homes and improving the overall quality and sustainability of homes for future generations. In Germany and the USA, over a third of rented homes are owned and managed by institutions who have delivered rented housing in these countries for decades, and we believe the UK is on a similar journey.”
David Reid, Managing Director of L&G Suburban Build to Rent, adds: “The build-to-rent sector has consistently proven its value to investors, offering robust and defensive income streams ideal for patient capital investment. As a business, we are dedicated to providing high-quality rental housing for families, and we see this as a significant opportunity for investors to address an urgent market gap.”
And Kate Butler, Assistant Director of Policy (Real Estate) at the BPF, comments: “The findings of this report demonstrate beyond doubt why we need to see the continued expansion of the Build-to-Rent sector providing high-quality homes across multiple price points. While the increasing transfer of PRS homes into owner-occupation is good for increasing levels of homeownership, it negatively impacts those seeking choice in where they wish to rent and at what price. Given the role that housing, especially rental housing, has to play in supporting and sustaining economies, it is critical that a positive investment climate for these new forms of rental homes is maintained, and local authorities and policymakers are continually encouraged to embrace it.”
This article is taken from Landlord Today