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Average UK rent prices continue to break all records on file, yet the demand for quality rental properties across the country remains at an all-time high. As a result, many now believe that the potential profitability of BTL investments could lead to a major spike in irresponsible letting practices as many new landlords enter the market.

A poll conducted by Get-Ground found that more than 80% of established landlords believe current market conditions could trigger an increase in irresponsible BTL activities. 75% of those polled believe that tenants are finding themselves with little choice but to be less demanding and discerning, potentially playing into the hands of unscrupulous landlords.

From excessive monthly rent payments to higher utility bills to monthly rent hikes imposed without warning or justification, tenants are willing to accept wholly unacceptable treatment simply to gain and/or retain tenancies.

“With recent history as our guide, it’s easy to imagine how the PRS could be brought into disrepute by bad actors: disproportionately high rents, unexpected bill increases, unfairly terminated tenancies, and so on,” said Faizullah Khan, CEO at Get-Ground.

“Landlords and tenants alike need the right protections and safeguards to ensure none of this poor behaviour is able to happen, particularly as high mortgage and energy costs continue to put even more pressure on landlords to find means to stay solvent.”

A perfect storm

Khan’s sentiments were shared by Ben Beadle, CEO at the NRLA, who warned that the escalating living-cost crisis combined with skyrocketing monthly rents could create the ‘perfect storm’ for those affected.

“Get-Ground’s snap poll data highlights a perfect storm that’s coming, combining the increased cost of living with rising rents,” he said.

“That rents continue to rise is due to the impact of a lack of supply and record demand in the PRS—this is very much a problem of the government’s own making.”

Recent data published by the Office for National Statistics does not make reassuring reading for anyone already struggling to make ends meet. Average monthly rent prices are up across the entire country and are predicted to continue heading skyward over the months to come.

• Private rental prices paid by tenants in the UK rose by 4.0% in the 12 months to November 2022, up from 3.8% in the 12 months to October 2022.
• Annual private rental prices increased by 3.9% in England, 3.1% in Wales, and 4.4% in Scotland in the 12 months to November 2022.
• The East Midlands saw the highest annual percentage change in private rental prices (5.1%), while London and the North East saw the lowest (3.5%).

Source: ONS

While commenting on the findings, the ONS highlighted how some letting agents are actually registering fewer tenants, as they simply do not have the available inventory to support them.

“The Association of Residential Letting Agents (ARLA) reported in their Housing Insight Report that they are now seeing a slight decrease in the number of prospective tenants registered per branch because of the ongoing lack of supply. ARLA also reported an increase in rent prices was seen across the UK,” read the ONS report.

“The Royal Institution of Chartered Surveyors (RICS’) UK Residential Market Survey reported tenant demand remained strong across the lettings market, driving rents higher.”

“These supply and demand pressures can take time to feed through to the Index of Private Housing Rental Prices (IPHRP). This is because the IPHRP reflects price changes for all private rental properties, rather than only newly advertised rental properties.”

The FCA has issued a formal call to the credit information sector to alter its approach to the provision of information to UK banks and lenders. Regulators have proposed new measures aimed at enabling lenders to make better lending decisions based on the broader financial circumstances of applicants.

Proposals presented by the FCA to benefit borrowers and lenders alike include the following:

• Establishing a new, more representative, and accountable industry body to oversee arrangements for the sharing of credit information
• Improving the quality and coverage of credit information
• Enabling greater competition and innovation through potential changes to data access arrangements and more timely data reporting
• Simplifying ways for consumers to access their credit files and dispute any inaccurate information held about them

Speaking on behalf of the FCA, Executive Director of Consumers and Competition, Sheldon Mills, emphasised the importance of a fair, effective, and accountable credit information market.

“It is vital that the credit information market works effectively for firms and consumers. We want to see industry reform to help deliver the changes, but in the meantime, it is important consumers know how to access their credit information and talk to their lenders if they are facing difficulties,” he said.

“Our proposals will help consumers get better decisions from lenders, and lenders will have confidence that the information they have access to is sufficiently comprehensive.”

Research suggests that while 90% of people have a basic understanding of what a credit score is, there is widespread confusion about the kinds of activities that can affect a consumer’s credit rating. For example, almost 50% of borrowers facing financial difficulties believe that simply contacting their lenders to discuss their issues will have an adverse effect on their credit score.

Meanwhile, 43% of people are not aware of the fact that they have the legal right to access their credit reports for free.

One in three consumers does not know their credit score

Elsewhere, a study conducted by the Post Office found that as many as one in three people do not know their credit scores. The poll was carried out to determine the extent to which the average person understands financial jargon and the impact complex terminology can have on a typical consumer.

One in five of those polled admitted that their lack of confidence regarding financial jargon had discouraged them from applying for financial products at some point in the past.

Commenting on the findings, the director of financial services products at Post Office, Ed Dutton, said that the figures illustrate just how important it is for banks and lenders to cut out the complexities when dealing with customers.

“We believe it’s important to speak to customers using straightforward language so that they feel confident in their decisions when borrowing,” he said.

“Personal loans can be used for a variety of reasons, such as buying a car or extending a home, and offer people a different option to other products, such as credit cards.”

“It’s always worth taking the time to read about any financial product you are considering and taking the time to seek help on jargon if anything is unclear.”

40% of those polled stated that while they have consulted with finance experts in the past, they felt confused or even intimidated due to the presence of complex terminology. Among them, 20% said they lacked the confidence to request clarification of such terms.

Worryingly, 22% said that even if they did not fully understand the language it contained, they would still sign a financial agreement or contract.

The latest official figures from HM Revenue & Customs (HMRC) indicate that residential transactions in the UK grew by 29% annually to reach 110,850 in October 2022. Meanwhile, non-residential transactions in the UK for October were down by 5% compared to the same time last year, totalling 9,940 transactions.

In its online publication, HMRC stated that current monthly property transaction levels are similar to those recorded at the end of 2019, prior to the COVID-19 crisis.

Key details published by HMRC include the following:

• The provisional non-seasonally adjusted estimate of UK residential transactions in October 2022 is 110,850, 29% higher than October 2021 and 3% lower than September 2022.
• The provisional seasonally adjusted estimate of UK residential transactions in October 2022 is 108,480, 38% higher than October 2021 and 2% higher than September 2022.
• The provisional non-seasonally adjusted estimate of UK non-residential transactions in October 2022 is 9,940, 5% lower than October 2021 and 3% lower than September 2022.
• The provisional seasonally adjusted estimate of UK non-residential transactions in October 2022 is 10,110, 1% lower than October 2021 and 2% higher than September 2022.

Source: HMRC

However, some experts have said that the figures quoted are not in line with the ‘economic reality’ of the bigger picture the UK is facing right now.

“On the frontlines, it’s now a very different story,” commented Lewis Shaw, founder of Teesside-based Riverside Mortgages.

“The phones have stopped ringing, buyers are holding off, and with the World Cup and Christmas upon us, most people have decided to sit tight and wait until next year.”

“That said, I still think the doom-mongers will be proved wrong and that a reduction of 10% to 15% in asking prices merely takes us back to pre-COVID levels, and as long as you’re able to negotiate a price reduction along the chain, I’d say most people should get on with it as it becomes a zero-sum game.”

A gradual return to normality

Speaking on behalf of mortgage broker Coreco, managing director Andrew Montlake said that even though the data published by HMRC does not take into account the economic turbulence of the past couple of months, transaction levels are indeed beginning to head back to some level of normality.

“The fact that the mortgage market has now stabilised and that rates are not set to peak as high as we thought has brought some confidence back into the market, despite the predicted long recession that lies ahead,” he said.

“After two years of surreal house price growth, some froth had to come off the market, and that will drive transaction levels rather than destroy them.”

Elsewhere, chief executive at later life lending platform Air, Stuart Wilson, said that the figures came as no real surprise to those who have been monitoring activity on the UK real estate market.

“Rising interest rates and soaring inflation have all contributed to a challenging climate; however, the robustness of the UK housing market should not be underestimated,” he said.

“Indeed, UK residential transactions have shown their typical stability in recent months and have remained at levels comparable to late 2019, before the pandemic.”

“While economic data like this is an indication of market trends, we should not lose focus on the reality faced by advisers and their clients every day.”

“Advisers need to be actively seeking to speak to clients about their options and helping them to understand that it is less about the headlines and more about what is right for their individual circumstances now and in the future.”

Once again, it is looking increasingly unlikely that the UK government will come close to meeting its own lofty housebuilding targets. Available inventory (particularly where affordable housing is concerned) is at an all-time low, and the country’s escalating housing crisis shows no signs of abating.

While all this is going on, a study conducted by Unlatch has shed light on just how much of the UK’s total land space is being used for residential developments. Or should that be, how little space is being utilised for such purposes?

Across the UK, there is an estimated 13.3 million hectares of available space. Of which, only 152,380 hectares of space have so far been used to develop residential properties, equating to a mere 1.1% of all available space.

Unlatch set out to determine which local councils across the country are making the most efficient use of the space they have available. And in doing so, we discovered that just under 99% of all UK land is being used for entirely non-residential purposes.

The figures should come as no less than shocking to anyone who understands the true extent of the housing crisis and the near-impossibility of getting on the UK housing ladder for the first time; fresh calls have been directed at the government to significantly step up housebuilding over the coming years, even though the likelihood of its own targets being reached is practically zero.

The new housing supply remains significantly lower than the government’s ambition of 300,000 new homes per year, with just 216,000 new homes having been supplied in 2021.

Public perceptions are misguided

Commenting on the findings, the head of the UK for Unlatch, Lee Martin, said that while most people think a sizeable proportion of UK land space has been allocated for residential developments, this really could not be further from the truth.

“There seems to be a common misconception amongst the public that the nation is bursting at the seams when it comes to the number of homes already built and that we simply have no available land left to address the current housing crisis,” he said.

“This simply isn’t the case, and, in fact, land used for residential development currently accounts for just over one percent of the nation’s total land area.”

“Of course, in major urban areas, this percentage is far higher, particularly in London, where the demand for housing is greater due to a larger population.”

“However, in some areas, residential development accounts for a tiny fraction of total land available, and it’s ironically in these areas where current homeowners are often most passionately against the construction of new homes.”

Regional land usage differences

The figures from Unlatch suggest that land usage for residential purposes across the UK is fairly consistent. However, there are some areas where a much larger or smaller proportion of available land is being used for such purposes.

For example, the highest land usage levels were recorded in the North West and the South East, both coming out at 1.4% land usage; elsewhere, the lowest land usage level was recorded in the Southwest of England, with just 0.7% of available land being used for residential developments.

Land usage rates in busy urban centres were the highest of all, with London recording a total combined residential land usage rate of 10.1%. Chelsea and Kensington had the highest land usage levels of all, with 22.3% of the space available being used for residential developments.

Ryedale, Richmond shire, Craven, West Devon, and Northumberland featured at the opposite end of the scale with a 0.2% utilisation rate, along with Eden, where just 1% of the land has been used for residential developments.