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UK PRS stock continuing to fall short of demand

UK PRS stock continuing to fall short of demand

The UK private rented sector will continue to be a strong investment as supply is set to fall short of demand in the long-term.

Summary:

  • Rental costs across the UK increased by an average of 2.3% month-on-month in June
  • Demand from tenants continues to place upward pressure on the price of renting, with supply falling 9% short of demand in June alone
  • Following the EU referendum, the UK private rented sector remains a strong investment as the core fundamentals remain resilient

Strong fundamentals across the private rented sector (PRS) in the UK will see rental costs rise as supply looks set to fall short of demand in the long-term.

Rents agreed on new tenancies across the UK (excluding London) over the three months to the end of July were up by 2.3%, compared to the same period in 2015.

Following the result of the EU referendum, investors have been able to continue securing higher rents on new tenancies, restoring confidence in the PRS. Capital growth has also seen growth, with house prices rising in the month following Brexit.

The UK’s growing population, increasing house prices and the undersupply of purpose-built accommodation in specific areas of need underline the value of the PRS as an investment asset.

Martin Totty, Chief Executive Officer of Barbon Insurance Group, said: “Ultimately, rents will be determined by supply and demand in the private rental sector; what we know here is that population growth will continue to increase demand, and that the housing stock isn’t growing quickly enough to meet that demand.

“However, with rents ultimately limited to a tenant’s ability to pay, rents are likely to continue to climb.”

Demand from tenants increased by 12% in June, with an average of 37 perspective tenants registered per letting agent branch in the UK during June. Supply failed to come anywhere close to meeting the increase in demand, rising by only 3% in June to 176 properties from 171 in May.

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