According to the findings, the dearth of rental properties is a UK-wide issue but is now particularly severe in the capital, where there has been a 20% drop in the number of properties available to rent over the last 12 months.
Over the same period there has been a 12% fall in the number of available rental properties across the UK. This reduction in supply is leading to a surge in rents, especially in the richest parts of London.
In the London borough of Westminster the average monthly rent now stands at £5,292, up 24% on June 2017's figures. Over the last 12 months the number of properties available to rent in this borough has fallen by 447 to 2,673.
Rents have also rocketed in Kensington and Chelsea, where the average monthly rent is £5,502, an increase of 14.7% over the last year. This borough has also seen a dramatic fall in supply of 427 properties over the same time, taking June 2018's tally to 1,584.
Strong demand and falling supply is ensuring that properties in such areas are still highly sought after, even at their premium rental prices. In both these super-rich boroughs the latest data shows that the typical rental property is on the market for just 39 days (June figure), a day less than the same month last year.
So far such price hikes have not yet translated into high yields for landlords. The gross rental yield in Westminster is still only around 3%. However, the trend is upwards and those landlords that continue to let their properties in these boroughs will soon start to benefit from improved returns as rents keep shooting up.
Rents might be rising but, at the same time, underlying capital values are falling. So much so, in fact, that real yields are negative overall. The typical asking price for a flat in Westminster has dropped 7% over the last year and this negative trend is a clear driver for landlords to exit while they still can.
But how many landlords will stay in the market?
The latest survey of the members of the Association of Residential Letting Agents (ARLA) suggests the exodus of landlords looks unlikely to slow down.
Its most recent figures, for April this year, show that the number of landlords exiting the market rose to an average of five per agency branch, up from four in March. The average prior to then had been three since April 2017.
In April letting agents managed 179 properties per branch, down from 185 in 2017 and 193 in 2015.
ARLA Propertymark chief executive David Cox blames a “barrage of legislative changes” that landlords have had to face, as well as political uncertainty.
Since April 2017 individual buy-to-let investors have been unable to offset all their mortgage interest against their profits and within the next two years none of this interest will be tax deductible.
Stamp duty changes came into force in 2016, which means anyone purchasing a buy-to-let property or second home must pay an extra 3% in stamp duty.
Right to Rent legislation, also rolled out nationally in 2016, now means that landlords must check the immigration status of their tenants or face unlimited fines or even a prison sentence.
Doug Shephard, Director at Home.co.uk, said: “The current situation is particularly dire for tenants, who are set to continue to face increasing competition for good quality properties and rising rents.
Government red tape and higher taxation in the lettings market has triggered forced sales by landlords. Moreover, this additional supply is now negatively impacting on capital values. Vendor landlords have done their maths and they know that if they continue to let the property, even with a rent hike, they will be losing money overall. Conclusion: time to sell,” he says.
The problem is, though, that the private rented sector (PRS) constitutes 20% of the housing stock, the majority of which is owned by landlords with small portfolios. A recipe for disaster? Maybe. Negative sentiment in this sector is certainly sufficient to turn confidence in the wider property market to the downside, thereby creating misery for all, especially those wishing to rent.”
