Landlords are being attracted back to the market due to the rapid rental inflation, which reached 14.3% in March according to Nationwide.
The number of buy-to-let mortgages issued in the 12 months to February this year was the highest amount since 2016. There were 275,600 mortgages, of which 159,100 were remortgages, indicating that not only are new landlords coming in, existing investors are sticking around.
This is despite the government’s approach to dampen down the sector in the past few years, with measures like the 3% stamp duty surcharge and the reduction in mortgage tax relief.
Rental growth is especially high in prime areas of London, as they’ve surged by more than 25% in a single year.
Andrew Groocock, regional head of sales for Knight Frank’s City, East and North region in London, said: “The extent of the recent rent rises has started to compensate for some of the regulatory changes of the last few years.
“It’s increasingly driving activity in London’s apartment market.”
Strict staycation rules meant a glut of short-let properties came onto the long-let market at the start of 2021, which caused rents to fall sharply.
Supply subsequently shrank as rules were relaxed, which took place as offices and universities re-opened, producing a steep rise.
Knight Frank expects rapid rental growth to continue, albeit it at a slower pace.
It forecast that rental values will increase by 17.1% over the next five years in the UK.
The equivalent figure is 22.7% in prime central London and 19.3% in prime outer London.
Underlining the strength of demand, the number of international corporate relocation enquires received by Knight Frank from prospective tenants in March reached its highest level since August 2019.
John Humphris, head of relocation and corporate services at Knight Frank, said: “Demand is hard to satisfy at the moment and it will only grow as summer approaches,” said. “If you own a good property at the moment, the chances are that it will be let before it even comes to the market.”