Shortage of rental homes as landlords sell buy-to-let properties

New rental properties are being snapped up within hours due to a shortage of homes coming on to the market.

The number of properties available to rent through letting agents has almost halved over the past three years, according to new research by industry body Propertymark.

This is pushing up monthly rents and deposits and leading to bidding wars among prospective tenants.

Propertymark surveyed 443 estate agency businesses with a combined total of over 4,000 branches across the UK. It found that on average, the number of properties available to rent per branch decreased from 30.4 to just 15.6 between March 2019 and March 2022.

Most letting agents reported that the number of landlords selling their buy-to-let properties and leaving the private rented sector has increased over the past three years while the number of new landlords entering the market has fallen.

Between 2019 and 2021, agents saw a similar number of buy-to-let properties being bought and sold each month. However, the latest survey results reveal that the average number of buy-to-let properties sold in March was 9.6 per branch, while the number purchased by investors was only 4.5. These figures suggest that less than half of private rental properties sold are currently returning to the sector, with the rest transferring to owner-occupier dwellings.

The research presents a "worrying picture" for private renters, said Propertymark CEO Nathan Emerson.

One agent, Adam Kingswood, told BBC News that more housing is needed to meet the demand and he's never known the market to behave like this in two decades.

"We will list a property and stop taking viewings after just a few hours," he said.

"Out of those who turn up, the majority will want the property and in most cases the landlord has a choice of what tenant they want to go with."

This leads to a sort of rental "beauty pageant", with people competing to prove they are desirable tenants. Ultimately, however, money does most of the talking.

"Two years ago, I could count on one hand the number of times a tenant would offer above the asking price for rent," Kingswood said. "Now people regularly offer three or even six months' rent in advance or an extra £50 a month above the asking price."

Separate research by the Royal Institution of Chartered Surveyors suggests that rents will grow faster than house prices (5% for rents and 4% for house prices) over the next five years.