The Rising Challenge of Tenant Demand and Dwindling Property Supply

As the private rented sector continues to evolve, one thing has become clear: the demand for rental properties is soaring, while the supply of available homes is shrinking. This imbalance is being felt strongly across the UK, but it’s particularly notable in the North West, where tenant enquiries have surged. If you’re a landlord in Manchester or the surrounding area, it’s important to understand how these trends may affect you – and what you can do to stay ahead of the game.

Tenant Demand Is at an All-Time High

Across the North West, more than 35% of tenants are actively searching for rental properties, making it one of the most competitive regions for renters . Demand is particularly high in key cities like Manchester, where the local rental market is driven by factors such as:

• Increased population growth: Manchester continues to attract students, professionals, and international residents. Recent statistics show that net migration has significantly contributed to the rising demand for housing .
• Homeownership remaining out of reach: With house prices in the North West increasing, many prospective buyers are finding it difficult to step onto the property ladder, leading them to remain in the rental market for longer .
• Greater flexibility for tenants: With more people opting for remote work or flexible lifestyles, renting provides the mobility that homeownership often lacks.

This surge in demand means rental properties are often snapped up quickly, leaving tenants with fewer choices and pushing competition between renters to new heights.

A Shortage of Rental Properties

Despite the increase in tenant demand, the supply of rental properties in the North West has not kept pace. Over 58% of letting agents in the region have reported a decrease in available properties over the past year . This shortage has been driven by several factors:

• Landlords leaving the market: Although our agency in Manchester has not seen an exodus of landlords, the Goodlord State of the Lettings Industry Report highlights that nearly 30% of landlords nationwide have either sold or listed their rental properties. As landlords exit the market, fewer homes are available for rent, intensifying the supply crisis .
• New regulations and rising costs: Some landlords are feeling the squeeze due to rising mortgage rates and new regulatory requirements, such as the impending EPC Band C standard, which could require costly upgrades .
• Increase in short-term lets: In popular areas like Manchester city centre, some landlords are switching from long-term rentals to short-term lets (e.g., Airbnb), which are often more lucrative in the short term, but further reduce the supply of homes available for traditional renters .

The Consequences for Landlords and Tenants

With more tenants competing for fewer properties, landlords may find themselves in a position of increased leverage. While this might seem like a positive development, there are several key challenges that come with this shift:

• Rising rent levels: As demand outstrips supply, rents have continued to rise. While this can mean higher yields for landlords, it also puts pressure on tenants. Many renters in the North West are now spending upwards of 35% of their income on rent, a figure that is slightly below the national average but still indicative of financial strain .
• Rental arrears: With tenants paying a larger proportion of their income towards rent, arrears are becoming a growing issue. In the North West, 33% of landlords have reported an increase in rental arrears over the past year . This trend is concerning, as it suggests that tenants are struggling to keep up with rising costs. However, we're seeing this figure is much lower with our agency.
• Difficulty securing tenants: Despite the high demand, landlords still need to ensure they attract reliable tenants. The competition may lead tenants to negotiate harder, or to move quickly to secure properties, but it also means that landlords must carefully assess potential tenants to avoid future issues such as arrears or property damage.

How Landlords Can Stay Ahead

In this increasingly competitive market, landlords need to be proactive in order to maximise their rental income while mitigating risks. Here are some strategies to help you stay ahead:

1. Offer Competitive and Flexible Terms - While demand is high, offering competitive rental terms can help you secure reliable tenants quickly. Consider negotiating on rent levels or offering longer-term leases to provide tenants with a sense of security.
2. Maintain and Upgrade Properties - Keeping your property in good condition is essential for attracting high-quality tenants. As tenants become more discerning, well-maintained properties with modern amenities can command higher rents and reduce vacancy times.
3. Consider Rent Protection Insurance - Given the increase in rental arrears, it’s worth considering rent protection insurance. Despite offeing rent protection insurance to safeguard landlords’ income against arrears, only 6% of landlords actively take up this offer.
4. Stay Informed About Market Changes - The rental market in Manchester is evolving rapidly. Stay informed about local trends and regulations to make strategic decisions for your property portfolio. For example, understanding the implications of upcoming energy efficiency standards will help you plan for necessary upgrades without being caught off guard.

Conclusion: A Challenging but Rewarding Market for Landlords

The North West rental market presents both challenges and opportunities for landlords. While tenant demand is at an all-time high, the shrinking supply of rental properties means landlords need to be strategic to make the most of this moment. By keeping your properties well-maintained, offering competitive terms, and staying informed about market developments, you can position yourself for success in this competitive environment.

If you’re looking for expert advice on navigating the current market or want to discuss your property portfolio, feel free to contact us today. We’re here to help you make the most of Manchester’s thriving rental sector.

The statistics and insights mentioned in this article are based on findings from Goodlord’s State of the Lettings Industry Report 2024, which surveyed over 1,500 letting agents, landlords, and tenants across the UK, with a specific focus on trends in the North West.