The Plight Of The Renting Brit Could Be An Opportunity For Your Portfolio

The Plight Of The Renting Brit Could Be An Opportunity For Your Portfolio
Daniel Johnston

7 months ago2 mins

Renters are in a tough spot right now. In the UK (and other places without 30-year fixed-rate mortgages), rising interest rates have been pushing up landlords' borrowing costs, forcing them to bump up rents for tenants. At the same time, those higher monthly payments – and a struggling economy – are stopping would-be homebuyers from taking the first step onto the housing ladder, adding to the pool of renters.

The situation is supercharging demand for places to rent and there just aren’t enough to go around: the number of UK homes available to rent dropped to a 14-year low in June. What’s more, the mismatch between supply and demand has shot through the roof, rising 57% just since June 2022. So it’s little wonder that UK rental prices are going up: they notched a 5.1% rise in June, the biggest year-over-year jump since official records began.

The plight of renting Brits doesn’t look great at the moment, but the issue is partly emblematic of a more systemic issue: there’s simply a lack of available housing in the UK. (That shortage is also a big part of why house prices haven’t plunged further as the Bank of England has unleashed interest rate hikes to combat high inflation.) But with inflation finally appearing to cool off, and rates nearing their anticipated peak, there could be a longer-term opportunity coming up for investors. See, to make any real improvement in that mismatch, private sector house-building is going to have to pick up a lot of slack in the coming years and, as a result, homebuilders could be in a prime position to benefit. Big UK developers like Barratt Developments, Persimmon, and Taylor Wimpey are likely to be front-and-center when the tide does turn. And with stock valuations in the sector now at historic lows, and many players paying decent dividends (Persimmon’s yield is over 13%), the sector could have you feeling right at home…



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