The likelihood of the sizeable housing stock shortage in the UK being resolved any time in the near future is treading a fine line between slim and none. Analysts and industry watchers now firmly believe that the major deficit between available supply and record-high demand will continue unabated for some time.

Driven by ferocious competition on the housing market, overall housing stock has plummeted by as much as 40% since the start of this year alone. According to the latest figures published by UK estate agent body Propertymark, the number of properties available for sale across the UK has declined steadily each and every month for eight consecutive months.

According to the agency, this is due largely to the way in which buyers are broadly interpreting the market as “insurmountable” and adjusting their property purchase decisions accordingly.

Today, the average estate agency operating in the UK has a total of 23 properties available to purchase, with 19 prospective buyers on average demonstrating an active interest in each property available.

Reluctance to enter the market

Speaking on behalf of the estate agent, the chief executive of Propertymark, Nathan Emerson, said that a growing number of prospective buyers are demonstrating a real reluctance to make their moves.

“Our worry is that people think the market is insurmountable,” he said in an interview with FTAdviser.
“Very few people can buy without selling, so the majority of buyers need to put a property on the market before they can buy their next property.”

Before the pandemic, Propertymark reported that the average property would be viewed around 14 times before being sold. Today, it is becoming the norm for homes to be sold after being shown to no more than three or four interested buyers.

“Properties are selling in much shorter periods of time, which means people think they don’t have time to sell their own property,” he continued.

“If we’re not careful, we could create an unusual marketplace purely based on a lack of confidence about moving.”

“But the reality of the situation is very different. Properties are coming up all the time, but buyers have got to be in it to win it.”

“If they keep viewing properties without selling the one they’re in now, then they fall into this self-fulfilling cycle.”

Completion times are down to 16 weeks

The figures from Propertymark also indicate that total sale completion times are now down to approximately 16 weeks.

“That’s four months, and the likelihood of not finding an onward property in that time is very small,” commented Mr. Emerson.

He also pointed out how estate agent fees have been significantly scaled down by numerous operators across the country in order to motivate more prospective sellers to put their homes on the market.
A percentage of the sale price is largely spent on marketing the property. “As the market cools off, this becomes important,” he said, going on to explain how estate agents “might spend less on advertising” due to sky-high demand and can therefore reduce their charges for the benefit of their clients.

He also said that there is little to no chance of the major stock shortage on the housing market being resolved at any point in the near future.

“We’re going into a quiet period, which means the market would only have three months to put stock on an even keel,” he said.

“We’ll be into the next year before we start seeing housing stock numbers rise again.”

Average house prices in the UK have reached another all-time high. With competition among buyers now twice as fierce as it was just two years ago, demand is aggressively outstripping supply in almost all key regions of the country.

According to the latest house price index from Rightmove, September brought another 0.3% increase in average house prices. This equates to an average property price growth of £1,091 and takes the average price of a home in the UK to a new all-time high of £338,462.

This may only represent a £15 increase on the previous record set in July, but it is nonetheless an impressive performance considering the impending withdrawal of the government’s stamp duty incentive.

“It’s to be expected that the astronomic rates of house price growth seen since the introduction of the stamp duty holiday will now start to subside as we approach the final deadline,” said James Forrester, managing director of Barrows and Forrester.

“But don’t be fooled into thinking the market will now deflate like a cheap birthday balloon. Buyer demand is extremely high, and property prices will remain robust, largely driven by second and third-rung buyers upgrading to larger, higher-value homes.”

Ferocious competition is fueling sky-high property prices.

Commenting on the figures, Rightmove’s director of property data, Tim Bannister, highlighted how the definition of ‘buying power’ has shifted in today’s market.

“Competition among potential buyers to secure their next home is now more than double what it was this time in 2019,” he said.

“To be in pole position in the race for the best property, you need to have greater buying power than the rest of the field.”

“That traditionally would mean deeper pockets to outbid other buyers, but in the most competitive market ever, today’s ‘power buyers’ also need to have already found a buyer for their own property, or to have no need to sell at all.”

“Proof that you are mortgage-ready or can splash the cash without needing a mortgage will also help you get the pick of the housing crop.”

Elsewhere, there are those who believe a small yet significant slowdown in property price growth will gradually make its mark on the sector over the coming months. Demand remains exceptionally high, but there are indications of more homes being put up for sale than during the first three quarters of 2021.

In September, around 14% more properties were listed for sale than in August.

Sluggish performance continues in London

As has been the case throughout much of the year, the property market in London has seen the most sluggish growth of any region year-on-year.

Whereas the South West, Wales, East Midlands, East of England, and South East of England have all seen average property price increases of more than 8% since the same time last year, average home prices in Greater London are up just 0.8% over the same period.

A statement from the NRLA (National Residents Landlords Association) has been published, highlighting the lack of government action to address the increasing COVID-19 rental debt for private landlords and renters across the nation. With the end of furlough and the recent benefit cuts, thousands of renters and landlords are finding themselves in a very bleak place, with many renters facing redundancy and landlords unable to keep up with mortgage payments.

A warning from the Bank of England states that renters are the most likely candidates for post-furlough redundancy, leaving them unable to pay their rent and facing mounting debt, thereby increasing the probability that many landlords will be forced to default on their BTL mortgages.

According to a report by the NRLA and acknowledged by the government, the number of renters finding themselves unable to pay their rent has tripled from 3% to 9% from 2019 to the end of 2020. Now that furlough has come to an end alongside the universal benefit cut, the expected number of people in rental arrears is expected to rise significantly.

The report strongly recommends that the government take decisive action by offering what the NLRA is calling an interest-free “hardship loan” to assist renters who are at risk of accruing unsustainable debt. The funds would allow the renter to clear rental arrears and would follow similar schemes already introduced in Scotland and Wales. The report also calls for the government to scrap the £20 a week cut to Universal Credit, pointing out the inevitable devastating consequences it will have on renters across the UK.

The needs of landlords have often been overlooked, with them not having the value attached to them that by rights they should, considering the importance of maintaining a healthy private rental sector. With many businesses and individuals across the UK suffering financially in one way or another due to the pandemic, little thought has been given to the plight of landlords. The NRLA is using its influence to try to get much-needed help for landlords, not just tenants, voicing the importance of helping them deal with non-payment of rent arrears.

Landlords would be wise to take advantage of the advice and support available to them in regard to BTL (buy-to-lead) products, refinancing options, and evaluating their current situation. It is vital that the support is there, with many lenders doing their bit by offering competitive loan products and relaxing criteria. It is, however, ultimately up to the government to provide the bulk of this much-needed support in the wake of the COVID-19 crisis.

Thousands of private landlords across the UK were the silent victims of COVID-19’s economic impact on the country. With millions suddenly facing the prospect of not being able to pay their rent, landlords found their income severely or completely drying up.

Consequently, countless buy-to-let landlords fell into arrears with their own lenders as their tenants stacked up what, in many cases, proved to be insurmountable debts.

Thankfully, it is looking like there is at least a little light at the end of the tunnel for landlords and tenants. According to the latest figures published by Paragon Bank, there was a major decline in the number of private tenants in arrears by the halfway point of 2021.

Specifically, the figures indicate that buy-to-let landlords in the UK had an average of 1.3 tenants with outstanding rent payments at the end of the second quarter. This equates to the lowest number of tenants in arrears since the first three months of 2011.

The figure had previously stood at 1.6 tenants with outstanding rent on average in Q1, which was also significantly down from the 2.1 average recorded in the second quarter of last year.

In monetary terms, the data published by Paragon Bank suggested that the average amount of outstanding rent had fallen to £1,781 in the second quarter of this year, down from £2,376 during the first quarter. This represents a reduction of £595 and is the lowest figure recorded in four years.

Signs of an improving economy

Positive movement like this provides reassurance of relatively early signs of economic improvement, benefiting both the private renting community and BTL landlords across the UK. The survey, which took into account the financial situations of around 750 landlords, found that 18% had received requests for rent payment holidays from their tenants.

A huge 36% had received at least one request from a tenant looking to change their monthly rent obligations, while 14% had asked for their rent to be reduced by as much as 20 per cent.

The vast majority of landlords reached agreements with struggling tenants to enable them to continue making payments and keep living in their homes. Approximately 36% said that they had agreed to change the rent obligations of their tenants in some way due to difficulties encountered during the pandemic.

The figures published by Paragon Bank also indicate that requests for rent changes, holidays, and reductions are also on the decline and have been for several months. Compared to the same time last year, landlords are receiving, on average, 7% fewer requests to amend or suspend rental payments from their tenants.

Experts are warning the BTL community that there may be further turbulence ahead, should it be necessary for the government to impose further restrictions throughout the autumn and winter of 2021–2022.

Nowhere is the pandemic price boom more evident than in some of the UK’s most picturesque and desirable rural locations. A recent BBC expose examined the effects of the pandemic on the Yorkshire Dales housing market, where desirable properties continue to attract dozens of offers within days.

Demand for such homes continues to outstrip supply by a significant margin, making it difficult for those residing within the region to relocate locally.

“We enjoy country life. We already live in one of the villages and would like to stay, but there is a lot of demand for village properties, and we are increasingly finding ourselves priced out,” Jonathan and Sarah Ratcliffe told the BBC, explaining that they would like to purchase a bigger home but simply cannot afford to do so.

Official Land Registry figures indicate that average property prices in Richmondshire are up almost 30% since the same time last year. This represents the most explosive growth anywhere in the UK, followed by other rural locations like the Cotswolds and North Norfolk, both of which have seen gains in excess of 20%.

Remarkable figures considering the turbulent events of the past 18 months, but a clear indication of shifting priorities among movers and first-time buyers.

All eyes on the countryside

The COVID-19 pandemic triggered a major rethink among prospective homebuyers with regard to where they want to live and how they see their ideal lifestyle. More people are working from home than ever before, meaning millions no longer need to live in proximity to their previous workplace.

Combined with the temporary stamp duty holiday and the lowest mortgage rates in recorded history, a frenzy of buyer interest was directed at desirable rural properties throughout the first half of 2021.

Consequently, house prices in rural regions skyrocketed. According to the latest figures from the Royal Institution of Chartered Surveyors (RICS), available inventory across most of the country’s most popular areas is close to or at a record low.

“Anything we listed [from last summer] flew out of the door. Richmondshire property has always been where we don’t get too high on the highs and low on the lows. It was a massive change from what we had seen previously. This is unprecedented,” commented Irving’s Property Estate and Lettings Agents’ director, Margi Irving.

“We have definitely got a supply-and-demand issue. We have gone weeks, just like other agents, listing just one or two. People are reluctant to put their house on the market because they have nowhere to buy,” she added, explaining that the 100+ homes she had on her books a year ago had declined to little over 30.

“We were Britain’s best-kept secret, evidently. Just recently, people have realised you get perfect value for money. It is a beautiful town. It has lovely villages surrounding it. The services and schools are very, very good.”