I spent part of last week trying to explain to somebody why a buffet can often be so disappointing.
There’s always a moment when you arrive at a buffet and convince yourself that the possibilities are endless. Then you lift a few lids and discover that most of the options are variations of the same thing.
Property can be a bit like that. We spend a lot of time talking about the latest announcement, the latest policy change or whatever happens to be attracting attention that week. Then, after all the noise dies down, you realise the same questions are still sitting on the table.
That thought came back to me recently as I reflected on the first month of the Renters’ Rights Act.
For well over a year, the industry has debated what the legislation might mean. Depending on who you listened to, it was either going to transform renting overnight or trigger an exodus of landlords from the sector. Since implementation, the market appears to have carried on with a level of calm that would probably disappoint those who enjoy theatrical predictions.
That is not to downplay the significance of the legislation. The Renters’ Rights Act represents one of the biggest changes the private rented sector has seen in decades, and landlords, agents and lenders will spend plenty of time adjusting to the new framework.
The challenge is that it remains far too early to draw firm conclusions about its long-term impact. However, what we can look at is how the market is behaving today.
Recent research from Foxtons found that new rental listings in London were up 3% year-on-year following implementation, while applicant demand remained robust. Its conclusion was that the legislation had left market momentum largely intact.
At the same time, Zoopla reported that rents in more affordable areas of the country are rising at more than twice the national average rate. Rents in locations where the average monthly rent is below £750 increased by 5% over the past year, compared with a national average of 2.1%, with Zoopla attributing much of that growth to a continued shortage of rental housing.
The biggest challenge facing the rental market today looks remarkably similar to the one it faced before the Act arrived. Demand remains strong, while the supply of available homes continues to lag behind it.
That backdrop is influencing behaviour across the market. Landlords are becoming more selective about acquisitions, and brokers are spending more time helping clients think about portfolio strategy rather than individual transactions.
It is becoming less about whether somebody should invest in property and more about where. What location offers the strongest fundamentals? Which asset type provides the best fit? How does a new purchase complement what somebody already owns?
None of those questions are new, but what has changed is the amount of scrutiny behind them. Investors now seem far less willing to take things at face value than they may have previously. Decisions that once felt relatively straightforward now involve more research, more comparison and a much clearer understanding of how a property fits into wider investment objectives.
Property investors have adapted to plenty of changes over the years. Tax reforms, regulatory changes and changing economic conditions have all prompted predictions about what might happen next. More often than not, investors simply get on with working out what those changes mean for their own portfolios.
We still speak to investors who are looking for their next purchase. A broker might call about a straightforward buy-to-let and end up discussing something completely different twenty minutes later. That is not unusual, and while we will undoubtedly continue to see operational changes across the sector in the coming months, there is nothing to suggest that the Act has fundamentally altered the dynamics of the rental market.
For all the debate surrounding the legislation, the basic economics of supply and demand remains the issue sitting at the centre of the market.
And like the buffet itself, changing the lid does not necessarily change what is underneath.
