The UK property sector has seen a shift in demand for homes to rent amid soaring inflation and a sharp cost of living crisis.
Potential homeowners are now putting their plans to buy on hold with mortgage rates near records of 6% on the back of rising interest rates.
According to Rightmove, the number of people enquiring about rental properties is up 23% compared to this time last year, while the total number of home-movers in the market looking to rent or buy is just 1% lower.
In addition to this, as many as four in 10 (42%) first-time buyers with plans to buy in the next few years said they already have their total deposit saved and are waiting for more financial certainty. A further 43% are in the process of saving.
“There are signs that mortgage rates and availability are beginning to settle following a turbulent two months, with indications they could drop further next year,” Rightmove said.
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But the shift is already putting pressure on a stock-strained rental market, with agents saying they are managing 36 enquiries per property on average, as competition between tenants hit record levels this year.
The number of smaller available rental homes, such as studios and one- and two-bed properties, is down by 4% compared with last year, while in the sales market it is up 13%.
First-time buyers have been hit the hardest by the mortgage rate hikes, and some of this group are now looking at the rental market as a short-term alternative, the real estate firm said.
However, the number of smaller rental homes on the market is 4% lower than last year, so choice is limited.
“Now that there are signs that mortgage rates are settling down, the indicators are that they will stabilise at a higher level than previous buyers had been used to,” Tim Bannister, Rightmove’s property expert, said.
“If someone has their deposit saved and is ready to move, they may find that right now presents a better opportunity than a few weeks ago, particularly with more choice coming onto the market and some sellers pricing more competitively in the lead up to Christmas.”
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It comes as the recent autumn budget guaranteed stamp duty savings until early 2025.
The lowest threshold at which homebuyers start paying stamp duty was confirmed to remain at £250,000, up from £125,000, a saving of up to £2,500 for home movers.
First-time buyers also get additional relief with the price they start to pay stamp duty set at £425,000, so long as the overall property price is below £625,000. This offers first-time buyers a tax saving of up to £11,250. The previous threshold at which first-time buyers started to pay stamp duty was £300,000.
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“Amardeep Lall, head of lettings at Manning Stainton said: “Since the pandemic began, the number of tenants looking for a property has far outweighed the number of rental homes available. This means that it has become very competitive between tenants to secure a viewing and a property, because there are only so many viewings we are able to book in.
“If a prospective tenant can share as much information as possible at the start of the process with us it greatly helps us to find somewhere for them more quickly, and it can put them at the front of the queue for properties that become available.”
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