Rents set to rise as 'peak lettings season' begins

Landlords could be set for a much-needed boost to their buy-to-let portfolios as the rental market hits its traditional peak summer period.

The summer is often a busy time for the buy-to-let market as landlords aim to cater for families finding a new home to get settled into before the new school year starts, plus it can be a less disruptive period for tenants to move.

Additionally, there is usually an influx of students to London as they try to secure accommodation for the next academic year.

More people could also be choosing to rent rather than buy a property due to high mortgage rates.

Analysis by major London estate agent Foxtons suggests activity in the summer lettings market has already started to pick up, with applicant demand rising 15% between May and June.

This extra demand could benefit landlords and property investors who have seen their rental profits hit by restrictions on tax relief in recent years, while there are warnings that rental growth has hit an affordability ceiling.

Peak lettings season

We may not have had much of a summer in the UK yet, but there are signs of the rental market hotting up, which could be good for landlords.

Applicant levels in central London experienced the highest demand, up 3% annually in the second quarter and 9% so far this year in east London, according to Foxtons.

Applicant budgets continued to rise, Foxtons says, reaching an average of £547 per month, the highest in recent years and 2% higher year-on-year. This means tenants could be willing to pay more to rent a decent property.

Budgets for one-bedroom flats increased by 5% annually, the agent said.

While there was a slight 4% reduction in listings from May to June, the number of new market listings is up 8% so far this year.

A lack of stock may also benefit landlords as they could charge higher rents to manage high levels of demand.

However, rents have actually decreased by 2% annually in the capital, suggesting there is a limit to what renters will pay amid the cost-of-living crisis.

“The peak lettings season has begun in earnest,” says Gareth Atkins, managing director of lettings.

“Our data shows renter demand rose 15% in June, in line with last year’s numbers so far, and it should continue to push upwards through the coming months."

Can you still profit from buy-to-let?

Many of the perks of buy-to-let have reduced in recent years.

Landlords now face extra stamp duty charges and you can only get mortgage interest relief at the basic rate of tax.

That has become a problem with rising mortgage rates, while reduced capital gains tax allowances mean even selling up can hit your profits.

Rental growth has slowed in recent months as landlords have been forced to cut rents to ensure they remain affordable for struggling renters.

Some landlords may even be heading for the exit due to the new Labour government’s plans to ban section 21 'no-fault' eviction notices.

But the rental sector still suffers from a lack of supply and high levels of demand, which could keep rents high in some areas.

Data from tenant referencing provider HomeLet shows rental growth was at 5.7% annually in June, almost half the rate of a year ago. But some regions such as the north of England are still seeing growth of up to 10% and much of the lowest growth is in the south of the country.

The latest Office for National Statistics (ONS) data also suggests rental growth remains high.

Average UK private rents increased by 8.6% in the 12 months to June 2024, according to the ONS, hitting £1,310 in England, £743 in Wales and £959 in Scotland.