In its recent quarterly analysis of the economy, the Bank of England has attributed increasing rents to an above-average number of landlords exiting the private rental market.
The Agents’ Summary of Business Conditions report, encompassing data from July to August, provides insights into various sectors, including housing, as gathered by the bank’s 12 regional agents. This data is a significant contributor to the decision-making process of the bank’s Monetary Policy Committee, which has recently decided to keep its base rate at 5.25% for another two months.
The report painted a picture of economic activity that was largely muted over the summer. It also indicated rising apprehensions about future prospects, especially from sectors that are consumer-oriented and those related to business services.
When the focus shifted to the housing sector, the report noted a persistent demand for privately rented properties. However, it underscored the decline in supply compared to the previous year. This was mainly attributed to tighter regulations and escalated mortgage rates, factors that drove some smaller buy-to-let landlords away from the market.
The report elaborated, “The strength of rental demand, relative to supply, meant that higher mortgage rates were generally being passed through to rents. There was little sign of a marked increase in rent arrears, although some contacts were worried that arrears could worsen later in the year.”
It’s worth noting that this isn’t a new concern raised by the Bank of England. Earlier in February, the bank’s notes alongside its interest rate announcement had also remarked on an unusual number of landlords opting out of the sector.