The Future of the Low Fell Buy-to-Let Market in 2024

The Future of the Low Fell Buy-to-Let Market in 2024

Property Sarah Mains 15th February 2024

The UK's property market is facing a significant challenge as the availability of homes for rent has plummeted to its lowest level in five years, exacerbating the difficulties tenants face in finding affordable accommodation. 


This alarming trend was highlighted in a recent analysis, which revealed that in 2023, only 261,542 private rental homes were available per month in the UK, marking a steep decline from the 379,459 monthly average of rental homes available in 2020 - a drop of 31%, underscoring a worrying trend that has been developing over recent years.


This scarcity of rental properties is occurring against a backdrop of increasing mortgage costs for landlords, which, in turn, places additional pressure on the rental market.


Higher interest rates, coupled with a high demand for rental properties, have led to significant increases in rental prices (rising from £1,343 pcm in 2020 to £1,739 pcm in 2023 - an increase of 29%), making it increasingly difficult for tenants to find affordable housing. 


The combination of reduced availability and escalating costs creates a challenging environment for renters, finding fewer properties available at higher rents.


The difficulties tenants face are further compounded by the financial pressures on mortgaged landlords, who have seen the affordability of mortgages decline sharply. This has led to a re-evaluation of their business models by some landlords, with a resultant divestment from rental property portfolios in some cases. The impact of this on the market has been profound, with average buy-to-let mortgage rates experiencing a sharp increase, further exacerbating the challenges landlords and tenants face.


The UK rental market's dynamics have shifted significantly, with rents rising by 29% as available rental stock dwindled by 31% since 2020.


The Bank of England has highlighted the potential repercussions of this situation in its financial stability report in the summer of 2023, noting that many landlords are likely to seek a raise in rents to offset their higher costs as they come off their fixed-rate mortgages, thereby exacerbating the difficulties for tenants, particularly those with lower incomes and lower savings.


The supply crunch in the rental market has led to increased competition among prospective tenants, with many properties being let almost immediately to quality tenants. This competition drives rents upwards, making it even more challenging for new tenants to find affordable housing. Additionally, the reluctance of existing tenants to move, fearing higher rents elsewhere, contributes to the shortage of available properties, as fewer tenancies are ending and coming back onto the market.


This situation is particularly acute at the lower end of the price spectrum, where the availability of homes to rent for less than £1,000 a month has significantly declined, making it even more challenging for those on tighter budgets to find suitable housing.


740,027 sub £1,000 pcm UK rental properties came onto the market in 2020; this dropped to 464,774 in 2023, a drop of 37.2%.


In contrast, the market for premium properties (over £2,000 pcm) has seen an increase in availability of 52.6% (from 203,502 coming on the rental market in 2020 to 310,516 in 2023), highlighting the stark disparities within the rental market.


The implications of this trend are far-reaching, affecting not only those currently looking to rent but also the broader housing market and the economy. 


How is this an opportunity for Low Fell landlords?


The current property market could present a notable opportunity for Low Fell landlords. To do that, we must look at the background statistics and numbers for the Low Fell area.


These are the average monthly stock levels of private rental homes in the Low Fell area (NE9) …


• 2019 – 107 rental properties per month in the Low Fell area

• 2020 – 92 rental properties per month in the Low Fell area

• 2021 – 84 rental properties per month in the Low Fell area

• 2022 – 76 rental properties per month in the Low Fell area

• 2023 – 66 rental properties per month in the Low Fell area


The average rent in the Low Fell area in 2020 was £606 per calendar month; in 2023, it was £776 per calendar month.


Low Fell rents have risen by 28%, as available rental stock dwindled by 28% since 2020.

Available Rental Properties in Low Fell

The escalation of rental prices signifies a robust income stream for Low Fell property investors. This is particularly advantageous in a market where high demand ensures properties are let swiftly, often to quality tenants willing to pay a premium for scarce housing options. For Low Fell landlords, this means not only an immediate increase in rental income but also the prospect of sustained long-term profitability as market dynamics push Low Fell rents even higher.


Furthermore, the challenging mortgage landscape, with rising buy-to-let mortgage rates with high percentage mortgages, has meant more landlords leaving the market, thereby reducing competition and potentially increasing the demand for existing Low Fell rental properties even further. 


This unique set of circumstances presents an opportune moment for current and prospective landlords to capitalise on their Low Fell property investments, leveraging the tight supply to secure higher rental yields and enhance the attractiveness of their property portfolios.


What about Low Fell tenants?


As the UK grapples with this challenging rental market landscape, a multifaceted approach is needed to address the underlying issues. This includes considering the impact of mortgage costs on landlords, the affordability of rents for tenants, and the overall availability of rental properties. 


The Government need to build more homes. Yet excluding land, the building costs in the UK start from £163 per square foot. A 3-bed semi is a minimum of 1000 ft.². The most conservative estimate shows that Britain is approximately 2 million households short now, meaning the bill for those additional 2 million homes would be £326bn (excluding the land). For context, the NHS costs £181bn a year!


The Government currently spends £17.35bn a year on housing, which would need to increase to £49bn a year for the next ten years to pay for those 2 million homes. To give you an idea of what that would cost taxpayers …


Income tax would need to rise by 5.81 pence in the pound to pay for those additional 2 million homes!


That is the equivalent of an extra £991 per year for every taxpayer for the next ten years - not a vote winner! Yet without significant Government intervention and strategic planning, the difficulties tenants face in finding affordable homes will likely persist, with potential long-term implications for the housing market and the broader economy.


Meanwhile, British landlords must pick up the pieces and continue to buy properties. Unfortunately, it is the nature of the game that with limited supply and increasing demand, prices (i.e., rents) go up. My heart goes out to Low Fell tenants having to pay these increased rents, but the market is the market, and we cannot control that. It has been proved beyond doubt, in Scotland and around the world, that rent controls do more harm than good, so I hope that the Government grasps the nettle and finally does something to sort our housing issues once and for all in the medium to long term.



Please do give me your thoughts on the matter.


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