UK Rental Market Sees Record Number of Tenants for June
The Stamp Duty holiday has been propelling the UK property market since July 2020, and while changes in the threshold have impacted both the demand and supply of property, the momentum from the past 12 months has sustained month-on-month growth in property prices.
In the first six months of 2021 alone, the average UK house price increased by 5.6%, bolstered by a limited supply of property and a rush to benefit from the maximum savings within the first phase of the holiday between March and June. According to Savills’ updated residential report, this demand could continue to push property prices for the rest of the year.
With the property market set to continue on an upward trajectory for at least another four months, Savills has forecasted annual price growth for the UK at 9% for the remainder of the year. Despite the Stamp Duty threshold returning to normal rates (0% tax up to £125,000) in two short months, the pace of sales we are seeing suggests that the property market will leave 2021 on around 1.62m national transactions – 35% higher than the averages we saw between 2015-2020.
While the UK property market will likely reap the rewards of the Stamp Duty holiday far past its deadline, it’s expected that growth will gradually stabilise as we enter 2022. Savills is anticipating a 3.5% increase in prices across the UK, notably less than what we have already seen this month, a direct result of limits on high loan-to-income ratios.
As always, depending on your source of information, future forecasts are slightly different. The reduction in Stamp Duty savings has led Halifax to a different conclusion on the prospects for 2021 and beyond. As July 1st saw the Stamp Duty threshold drop to £250,000, Britain’s biggest mortgage lender reported just a 0.4% rise in property prices.
Although prices continued to rise – which equated to around a £1,000 increase – these increases were significantly more competitive last year, in the midst of the pandemic. As a result of this, Halifax has reported a drop from 8.7% to 7.4% in the annual rate of increase, its lowest level since March.
But what does this mean for the rental market?
While the Stamp Duty holiday has inevitably been an incentive for some renters to make the move onto the property ladder over the past year, the demand for rental property has not only remained, but it has continued to grow.
In June, the number of new prospective tenants was the highest number on record for the month, equating to 88 per estate agency branch in the UK. With monthly mortgage payments now averaging more than monthly rents, many landlords have taken the opportunity to increase their rental income over the past few months. The number of tenants experiencing rent increases in June reached 60%, considerably more than the 28% in 2020 and 55% in 2019.
Despite the Stamp Duty holiday initially introducing more opportunities to enter the property market at more affordable prices, the success of this incentive continues to push UK property prices to new heights.
While Halifax reported just a 0.4% increase in prices during June, prices are still rising, anchoring existing tenants in the rental market while continuing to drive demand for rental property. With Savills expecting property price growth to remain strong for the remainder of the year, this gives investors the opportunity to benefit from increasing demand and competitive rents.