5 surprising reasons for the 3-bed home shortage
Feel like three bedroom homes are hard to get your hands on? It’s not just you. An imbalance of supply and demand is making three bedroom homes hot property, and here’s why.
Three bedroom homes for sale are hard to come by at the moment, and it’s because everyone wants one - from first-time buyers to retirees.
There’s an imbalance of supply and demand for three bedroom properties, making them among the quickest selling of any property type in the country.
But what’s causing it? What’s put three bedroom homes at the top of everyone’s list?
We’ve done some digging, and it turns out there’s a few reasons. Let’s take a look.
1. Older homeowners want to host Christmas
Our survey of 2,000 UK homeowners aged over 65 found that 41% live in a home which is ‘larger than they need’.
And a huge 9 in 10 homeowners aged 65+ have at least one spare bedroom. This equates to a massive 10 million spare bedrooms that growing families would love to get their hands on.
These homeowners have lived in their current home for more than a quarter of a century on average. So it’s easy to see why they might find it hard to move on.
22% say emotional ties are a barrier to moving, while more than a quarter (27%) say they’d be concerned about being able to host Christmas if they downsized.
But downsizing can often release capital, cut energy bills, reduce mortgage repayments or even make homeowners mortgage-free. Hosting might be off the cards, but that’s not to say Christmas is ruined.
2. First-time buyers are older than ever
The age Brits buy their first home has been rising, and first-time buyers are now aged 34 on average - compared to 30 a decade ago.
It means many first-time buyers are skipping the one-bedroom flat or two bedroom starter home in favour of a family home.
With first-time buyers making up 34% of buyers in the market, that’s a large proportion joining the hunt for family-sized properties.
Our data shows that 40% of first-time buyer enquiries are for three bedroom houses. That makes them an even bigger buyer group for this type of property than people moving house, who enquire about three bedroom properties 38% of the time.
| Type of buyer | Property | Percentage of enquiries |
|---|---|---|
| Mover | 3 bed house | 38% |
| Mover | 4+ bed house | 22% |
| First-time buyer | 3 bed house | 40% |
| First-time buyer | 4+ bed house | 9% |
Zoopla data, October 2023
3. The stress of moving house in old age
Those who own a home larger than they need reckon it takes them an additional 12.6 hours and £91 per month to maintain, compared to a more suitably-sized property.
But despite this extra work and cost, 25% of older homeowners are put off selling by the stress of moving house ‘at their age’.
No one can deny it’s a stressful process. If you’re in a dreaded chain, everything can feel as delicately balanced as a stack of cards.
What’s more, the housing market is slower than it was over the last three years. Higher mortgage rates make the market a little more uncertain, as people find it harder to be approved for finance.
Not to mention, costs are higher for everything from removals to repairs. This adds financial pressure to the process, no matter your age.
For many, it’ll be about weighing up if the time and money you’ll save in the long-run is worth the short-term stress of moving.
4. Terraces and semis with three bedrooms sell among the quickest of any property type
Speed of sale is an important indicator of buyer demand. The quicker a property type sells, the more buyers are interested in that sort of property.
Three bedroom terraced houses and three bedroom semi-detached houses are 2 of only 3 property types selling faster than the national average of 34 days.
They sell in 31 and 32 days respectively, with only two bedroom terraces selling quicker at 28 days.
However, if your budget can stretch to a three bedroom detached house, you’re likely to have more choice and less competition.
Three bedroom detached houses are taking 43 days to sell, the second longest behind only four bedroom detached houses (47). It’s a symptom of the higher average cost of detached houses - they require larger mortgages which means less demand at the moment.
5. Three bedroom terraces are in highest demand
The table shows the percentage share of buyer enquiries and supply of homes for sale of different property types.
The biggest gap between demand and supply is for three bedroom terraces. They make up almost 20% of enquiries in the market in October 2023, but only represent 12% of homes for sale.
Three bedroom semi-detached houses have the next highest imbalance between demand and supply.
Three bedroom detached houses, on the other hand, have a much lower level of demand. Detached homes are usually more expensive, so this is another reflection of higher mortgage rates limiting buyer demand for this type of property.
Key takeaways
- New research shows there aren’t enough three bedroom homes on the market to satisfy current demand
- They’re a popular choice for all types of buyers - from first-time buyers who are preparing for children to older generations who still want to host Christmas
- Most older homeowners live alone or with their partner, but still have 2 or more spare rooms
- There are an estimated 10 million spare rooms across the UK as 9 out of 10 homeowners aged 65+ have extra bedrooms they don’t use
Rents for new lets rise £1,300 in a year
Rents rise 10% for the 20th month in a row, but in London and the more expensive areas of southern England, the pace of inflation is starting to slow.
Demand for rental properties is currently running at 27% above the 5-year average.
Over the last year, the average rent for a new let increased by 10.1% to stand at £1,166 per month.
That means the average annual rental bill is nearly £1,300 higher than it was a year ago, standing at almost £14,000, compared to £12,700 last September.
This marks the 20th consecutive month of our index reporting rental inflation of over 10%.
However, for renters staying in their existing homes, year-on-year rises are much slower at 5.7%, according to the Index of Rental Prices from the Office for National Statistics.
The table below shows the rates at which rents have increased across different regions of the UK.
Average rent increases by region: November 2023
| Region | Avg rent today | Avg rent 12 months ago | Annual % change | Annual £ change |
|---|---|---|---|---|
| Scotland | £753 | £663 | 12.8% | £90 |
| North West | £799 | £719 | 11.7% | £80 |
| Wales | £817 | £737 | 10.4% | £80 |
| London | £2,057 | £1,867 | 10.3% | £190 |
| East Midlands | £819 | £739 | 10.1% | £80 |
| East | £1,115 | £1,015 | 9.9% | £100 |
| South East | £1,256 | £1,146 | 9.8% | £110 |
| West Midlands | £855 | £785 | 9.6% | £70 |
| North East | £651 | £601 | 9% | £50 |
| South West | £1,020 | £940 | 8.7% | £80 |
| Yorkshire & The Humber | £761 | £701 | 8.6% | £60 |
| Northern Ireland | £744 | £704 | 5% | £40 |
| UK | £1,166 | £1,056 | 10.1% | £110 |
Zoopla
Rental inflation in Scotland boosted by rent controls
Scotland is registering the highest level of rental inflation in the UK at 12.8%.
That’s because landlords are pushing to maximise rents for new tenancies in order to cover increased costs - and to allow for the fact that future rent increases will be limited over the life of the tenancy.
The average rent in Scotland stands at £753, which is £90 higher than a year ago.
Rental inflation in Scotland has now started to moderate down from highs of 13.7% back in February, but we expect it to continue rising at above-average levels.
Rents are growing at the fastest rate in the cities of Edinburgh (16.6%) and Glasgow (13.4%) .
But renters looking for new lets in areas between these two cities will also notice sharp increases: in Falkirk rents are up 14.7% year-on-year, while in North Lanarkshire they’ve risen 13.9%.
In the more sparsely populated areas north and west of Edinburgh and Glasgow, rental inflation is less dramatic, with North Ayrshire, Moray and the Highlands all registering rental growth below 5%.
Rental inflation slows down in England’s southern cities
Over the last 12 months, rental inflation has slowed down in southern England’s most expensive cities.
The largest moderation is happening in London, where rental inflation has decreased from 17% a year ago to 10.4% today.
The inner London boroughs were the first places to see rental inflation fall below 10%.
However, outer London areas such as Harrow, Barking and Dagenham and Redbridge continue to register rental growth above 13.5% - some of the highest increases in the UK.
The second and third largest slowdowns are recorded in Bristol and Brighton, where rental inflation fell to 8.8% and 6.0% respectively.
Rental inflation in the coastal communities of Hastings (6.7%), Newport (8.9%) and Blackpool (5.5%) is also more aligned with earnings growth (8.5%).
Those reductions show us that landlords are becoming more realistic in pricing their rentals, taking into consideration the cost-of-living struggles.
What are renters doing to minimise the impact of higher rents?
Faced with higher rents and a limited supply of homes on the market, renters are more commonly considering renting smaller homes, moving to cheaper areas or sharing properties with other renters to reduce costs.
Renters sharing does reduce the cost per person but it comes at the personal expense of privacy and space. Data from the Resolution Foundation found private renters have experienced a 16% reduction in floor space per person over the last 20 years.
What’s next for the rental market?
We expect rental inflation to remain above 9% for the rest of the year as earnings growth remains strong - and while higher mortgage rates are stopping many renters from moving into home ownership.
We currently anticipate national rental growth of 5-6% in 2024 - but rent increases in cities are likely to be higher.
Key takeaways
- Rents for new lets have risen by more than 10% for the 20th month in a row
- Scotland is seeing the biggest rises, where rent controls are encouraging landlords to secure higher rents upfront
- In more expensive areas, such as London and the south, rental inflation is starting to slow