New research released by industry body Propertymark has revealed that the average number of available rentals on the books of letting agents has fallen 50% from 30 to 15 amidst continuing supply and demand issues. This is leading to soaring prices, with Rightmove’s annual rental survey finding that rents are up 11% year-on-year to a staggering £1088 per month outside the capital. Prospective tenants are now having to offer up to six months rent in advance, or even send CVs for their children and photos of their well-behaved pets in an effort to convince landlords to let them the property.

Despite inflation hitting a 40-year high of 9%, and Brits across the country grappling with the worst cost-of-living crisis seen in over a generation, the housing market remains strong. This is primarily being caused by a severe lack of available homes, meaning prospective sellers and landlords are able to push up their prices in the knowledge that their property will still be snapped up in record times.

In the Conservatives’ 2019 election manifesto, the party promised that 300,000 new homes would be built each year, however, research from the National Housing Federation suggests that this target remains 40,000 short of what’s needed to combat the crisis. In addition, only 216,000 new homes were built in 2020/21 – partly due to the severe disruption caused by the coronavirus pandemic. However, despite supply shortages looking set to continue, the pressure of the cost-of-living crisis on UK families is likely to bring the issue of soaring prices to boiling point.

David Hannah, Group Chairman at Cornerstone Tax, discusses why this trend is occurring and whether it is due to slow down:

“I think we will inevitably see a slow down in the property market, but it won’t be as substantial as some people think. If we look at what has been going on – house price growth, retail inflation, energy costs surging, that’s going to put pressure on employers to raise wages. I believe wages will rise, meaning real spending power will not actually decrease as much. However, if this doesn’t happen at the required rate, the act of renting or purchasing property will become more and more unaffordable in the UK.

“The problem we do have is the rate of demand and supply. If builders are building and they’re over supplying, it will soften the increase and the appreciation in asset value. But, if the number of people wanting to buy houses continue to exceed the supply, then those prices are going to rise. This is exactly what is happening currently, with just 216,000 new homes being built in 2020/21, falling some way short of the government’s 300,000 a year target.

“We also have an open market in the UK which means not only are domestic purchasers and investors looking to buy but we have inbound investors. We also have quite a number of people relocating to the UK. Overall, I expect demand for UK housing to continue to outstrip supply – pushing price increases ahead of inflation and provided wages are increased, the affordability of housing will stay in lockstep.”