Holiday Lettings Boom Sparks Rental Supply Crisis
Investors flocking to take advantage of the UK staycation boom have helped to undermine rental markets in holiday home hotspots, leaving tenants homeless.
The stock of rental properties in many popular locations has slumped sharply following wholesale action by buy-to-let investors to move long-term lets on to the short-term holiday market. The latest data from property portal Rightmove show that the supply of long-term rental properties on the Isle of Wight in June and July had plummeted by 82pc compared with the same period in 2019. This means that fewer than a fifth of the properties available to rent before the pandemic are now on the market.
The 10 locations that recorded the largest falls in rental supply were all holiday resorts, and with the exception of West Devon, where supply fell 76pc, were all coastal. In North Devon, rental properties plunged by 80pc, while in South Tyneside and Northumberland in the North East, they dropped by 74pc and 73pc respectively.
The shortage of property for rent has led understandably to increased competition among renters. Tenant demand for every available property, i.e. the number of tenants inquiring compared to the number of available listings across the top 10 areas has more than quadrupled since 2019. Competition in Blackpool, where supply has fallen by 74pc, has soared by 517pc.
Need for perfect references and flawless payment record
On the Isle of Wight, competition has surged by 376pc. Ben Hollis, of Lancasters estate agents, says across the whole of the Isle of Wight there are normally 200 properties available. This week, there are 18. At one point a few weeks ago, there were just four. Furthermore, if the company leaves a rental property online for just one hour, it will generate 30 inquiries.
Limited supply has created a vicious circle as desperate tenants try to secure accommodation. Some would-be renters have offered to pay a year’s rent in advance in order to acquire a home, says Mr Hollis. The shortage of stock is forcing tenants to engage in a ‘Mexican standoff’, whereby nobody is prepared to act first, for fear they will not find anywhere to live.
Craig Webster, of Tiger Sales & Lettings in Blackpool, says they are seeing more tenants staying put, which creates a lack of movement in the market and a consequent dearth of new rental homes becoming available.
Additionally, renters are seeking to sign longer-term tenancy agreements, which in turn puts even more pressure on supply, states Lawrence Williams, of agent Webbers Property Services in Devon and Cornwall.
Sarah Coles, of stockbroker Hargreaves Lansdown, is adamant that tenants need to be armed with the best possible references and have a blemish-free payment record, or they will lose out. This means that anyone who had to ask for help from their landlord during the crisis could find themselves struggling to find a new place to live.
Cost of holiday rentals 54pc higher than in 2019
Travel restrictions, the cost of the Covid tests required to book foreign holidays, as well as the oft-changing quarantine instructions have resulted in a boom in British holiday bookings that has extended well beyond the traditional peak season and looks set to continue into 2022. Landlords can achieve higher yields on holiday lets than before the pandemic, thanks to higher prices and, critically, for longer periods of time. They also benefit from superior tax arrangements to those for buy-to-lets.
Data from property management site Guesty show prices of September short-term let bookings are 54pc higher than in the same period in 2019, and those booking Christmas stays are already spending 44pc more.
Analyst Neil Hudson of BuiltPlace considers the stamp duty holiday has contributed to the chronic lack of supply, because the savings to be made have incentivised investors and second homeowners. Consequently, these buyers are classed as net ‘takers-away’ because they have nothing to sell when they buy, he adds.
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