It's quite clear that private renting has become an increasingly integral part of the UK's housing make-up in recent times.
Global business firm PwC predicts that by 2025 around 60% of London households will be private rentals, while the latest English Housing Survey showed that during 2014-2015, 46% of 25-34 year-olds lived in the Private Rented Sector.
With a record number of private tenants in the country, there is a real need for good quality rental homes.
Tenant demand has long out-weighed supply – there have been many reports pointing out that the average available rental property is being chased by numerous tenants.
According to pre-tenancy referencing firm Tenants Plus, 39% of tenants viewed or missed out on 3-5 properties before finding their rental home.
Stock is falling
A number of Government initiatives designed to help first-time buyers have started to affect the country's rental stock levels.
Firstly, in last July's Summer Budget it was announced that the traditional wear and tear allowance would be scrapped and that from April 2017, landlords' mortgage interest tax relief will be gradually reduced to the basic rate of income tax.
More recently, in November last year, a 3% stamp duty surcharge on the purchase of buy-to-let properties and second homes was proposed and subsequently introduced in April of this year.
Landlords and investors now have to pay an additional 3% in stamp duty land tax when purchasing a property and it's been widely reported that in the run-up to April's deadline there was a surge in transactions of this nature.
However, the Association of Residential Letting Agents (ARLA) recently reported a sharp drop-off in rental property stock levels during March. This situation may get worse before it improves as the effect of the stamp duty increase is calculated and landlords begin to prepare for next year's tax changes.
ARLA says that during March the average letting agency branch managed 169 rental properties, down from 192 in the same month the previous year. It also noted that this is the lowest level of supply it has recorded since it started collecting data from agents in January 2015.
The organisation's research suggests the stock shortage is most acute in the capital, with the average letting agency in London having just 122 rental properties on its books.
What's more, 65% of the letting agents surveyed said they feel many current and prospective buy-to-let landlords will leave the market as a result of the stamp duty surcharge – something which will have a further effect on rental property supply.
It seems, therefore, that there is likely to be a shortfall of rental properties which will need to be addressed.
It could provide a good opportunity for lapsed landlords – those who have an empty property which they used to let – to re-enter the market.
These individuals will not have to pay the stamp duty surcharge but will still benefit from high tenant demand and, in most UK locations, high yields too.
Dipping a toe into the market
A shortage of rental property could also provide an opportunity for those who have thought about entering the market.
Letting a room in the property in which you live has become a lot more attractive in recent times.
The 'Rent a Room' allowance was almost doubled in last year's Summer Budget and now homeowners who let a spare room in their property can earn up to £7,500 a year tax-free.
By doing something like this, people who have thought about becoming a landlord can help to house tenants while building up some extra income and getting a feel for letting a property before entering the buy-to-let market for good.