Published: 20/04/2022 By Tam van WykThe Easter break doesn’t always boast the best weather, it’s even been known to snow. This time around, though, was one of the better ones and, as the sun came out, we hosed down our patios, dusted off our barbecues and dreamed of long hot summers.
Now, it’s back to reality. Fortunately, despite the various headwinds, house prices (and rents) continue rising. According to Rightmove, prices saw their biggest jump in March for 20 years (+1.7%) and Nationwide’s annual growth hit 14.3%. The driver of those rises is not hard to identify – it’s the yawning gap between supply and demand. As Tim Bannister of Rightmove explains:
“The imbalance between high buyer demand compared to low available property supply is the greatest that we have ever seen for the start of a spring market.”
And, in London’s rental market, the shortages are even more acute. In a recent report, the National Residential Landlord’s Association (NRLA) claims that in order to just keep up with the number of new households being created, we’ll need an extra 85,000 rental properties in London per year for the next five years. The disparity between supply and demand means rents in the capital have risen by 11.6% over the last twelve months. That’s good news for landlords, but bad news for tenants, especially with large numbers of renters ‘boomeranging’ back to the capital as the pandemic draws to an end.
Sooner or later, however, with interest rates and prices rising, affordability will get over-stretched. Supply should also have closed some of the gap with demand, reducing price growth to more sustainable levels. In contrast, in the rental market, unless the government begins encouraging investment rather than taxing it, supply levels will get worse, and rents will keep rising.