Supply of Properties for Sale Shrinks

The supply of properties to the re-sale market remains constrained and unable to keep up with the high-levels of buyer demand. The shrinking supply of re-sale property meant the number of new properties coming to the market fell by a third in June.

RICS chief economist, Simon Robinsohn commented:

"Respondents are pretty unanimous in once again highlighting the challenge around supply, whether in the sales or rental markets.”

Inevitably, this lack of available properties to buy has impacted property prices, which have continued to increase. 83% of surveyors who are members of the Royal Institution of Chartered Surveyors (RICS) reported an increase in prices. With no clear decrease in demand, all parts of the UK continued to report strong levels of property price increases. The majority of RICS members believe that prices will continue to rise over the course of the next year.

Demand for Rental Property Increases

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The demand from renters increased in June, boosting the rental market and increasing the cost of renting.

60% of surveyors reported an increase in demand for rental property in June, up from 48% in May, which could be due to .

The supply of rental property to the market is also constrained, with surveyors reporting an intensification of the decline in supply of new rental property to the market as renting has become cheaper than buying for the first time in the past five years. Surveyors have forecast an average 3% increase in rental prices over the next 12-months, including London, where the market has dipped.

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Undersupply of Housing in the UK

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The number of new homes needed in England is estimated to be up to 345,000 per year, accounting for new household formation and a backlog of existing need for suitable housing. In the financial year 2019/20, the total housing stock in England increased by circa 244,000 homes. This is an increase of 1% year-on-year, but the level of supply is still far below the level of housing needed to meet demand, which causes upward pressure on house prices.

Mr Rubinsohn of RICS said, “the government needed to continue to help increase the supply of new homes. While the role of the credit channel and the extended period of ultra-low interest rates can't be ignored, it is critical the government is able to create the conditions to support higher levels of new build development to address the worsening affordability challenge."

He added that homes are "needed across all tenures", which includes social housing and private rental, alongside home ownership.

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How to Profit from Buy-to-Let Property Investment When Supply is Constrained?

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With a constrained supply of properties to the re-sale market, home buyers are paying more than the asking price and buying in record time, which makes buying a property for investment very tricky. As an investor, it doesn’t make commercial sense to pay more than the property is worth and you will also have to pay a higher deposit for your purchase, limiting your ability to leverage if the property is down-valued.

This is a real shame as there is a restricted supply of private rental property, so rents and property prices will considerably increase over the next 5-years.

Purchasing a buy-to-let property for investment either pre-construction, or, during construction, offers many commercial benefits for property investors keen to secure a good deal. As developers are keen to sell as many properties as they can off-plan, they offer prices discounted from the end price nearer to completion, free legal fees, furniture packs and stamp duty contributions, saving property investors thousands of pounds on their purchase. Properties can be held for you, with a reservation fee so you don’t lose out.

Register your interest in buying off-plan property today by completing our quick and easy 60-second questionnaire and our property experts will be in contact.

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