0:01 AM, 9th January 2024, About 10 months ago 1
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Tenants face the prospect of rents rising even higher this year and the number of homes to rent will continue shrinking, Rightmove says.
The UK’s largest property website is predicting that rents will increase by 5% outside London and 3% in the capital by the end of 2024, following a 10% and 6% rise respectively in 2023.
The main driver of the rent inflation is the higher cost of buy to let mortgages, which landlords have passed on to tenants in some cases.
Rightmove’s lettings expert Christian Balshen said: “Landlords have always prioritised finding a good, reliable tenant for their home alongside the reality of having to pay the mortgage each month.”
However, many tenants are reaching their affordability limit as the average renter spends 51% of their salary on rent, up from 49% last year and 46% in 2019.
As a result, more landlords are having to lower their asking prices, with 23% of properties seeing a reduction during marketing, compared to 16% this time last year.
Rightmove says that demand for homes for rent still exceeds the supply with renters facing fewer choices and higher rents.
A typical letting agent gets 11 enquiries per advertised home now, down from 14 last year.
Meanwhile, mortgage rates have dropped slightly, with the average five-year fixed rate below 5% for the first time since June but rates are still too high for first-time buyers.
Saving for a deposit is hard for potential first-time buyers in the face of rising living expenses and limited options in the rental market – many now face renting for longer until they can afford to buy.
Rightmove’s property expert, Tim Bannister, said: “The lower mortgage rates and the better balance between supply and demand in the rental market are good signs for the future.
“But we should not forget that mortgage rates are still above the levels of previous years, and the rental market is still tight for those who want to move.”
He added: “The difficulties for potential first-time buyers will keep affecting the rental market this year, as some of them will need more time to save for their first home.”
Another factor that will affect the rental market in 2024 is the Renters (Reform) Bill which will introduce significant changes to the way tenancies are regulated.
The Bill will abolish section 21 ‘no-fault’ evictions, introduce lifetime deposits, and strengthen the rights of tenants.
Many landlords are concerned about the potential impact of the Bill on their business, and some may decide to exit the market.
Rightmove’s General Counsel, David Cox, said: “Above all else, letting agents and landlords want clarity, so that they can plan for the future and agents can provide the right guidance.”
The Bill may also divert attention from the need to improve the energy efficiency of rental properties, which the government has recently relaxed.
Rightmove’s survey found that fewer landlords are planning to make green improvements to their properties, while more are considering selling them.
Mr Cox said: “It’s likely that EPC requirements in some form will re-appear in the near future, so landlords with lower EPC rated homes should still keep this in mind and consider the improvements they might make.”
Martin Roberts
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Sign Up11:37 AM, 9th January 2024, About 10 months ago
'… Some (landlords) may decide to exit the market'.
No kidding, a lot have many more will.
Wonder why?