Market Update: What’s Happening in the Private Rental Sector
After a challenging 12 months for the economy, how is the private rental sector faring, and what lies ahead for buy-to-let landlords?
In this market analysis, we look at some facts and figures to give you an accurate update on the private rental sector.
Demand
Demand for rentals is running hot. It’s up 3% on 2022 levels and a whopping 42% higher than in 20191. Reasons for this include first-time buyers struggling to get on the property ladder (an issue made worse by higher interest rates) and a shortage of purpose-built student accommodation.
Supply
The long-term imbalance between housing supply and demand shows little sign of improving, with many developers opting to go slow on new building projects due to the higher cost of materials and rate pressures.
However, predictions that landlords would exit the market in their masses (made this time last year when rates surged overnight) have not eventuated. While some landlords have sold up, many others are taking a long-term view and holding on to their investments.
And some landlords are expanding their portfolios. Of those rental properties sold in the past 12 months, about 30% to 50% were snapped up by other landlords and remain on the rental market2.
The cost of renting
There’s no escaping the knock-on effect of higher interest rates on inflation on rents. Experts predict rental inflation will be 8%3 by the end of the year, although it’s currently a few percentage points higher.
Tenant priorities
Cost-of-living pressures are at the forefront of many tenants’ minds. When asked to nominate the issues that they felt were extremely or very important, tenants identified energy prices (80%) and the cost of rent (57%).4
Other key priorities include:
- Location (58%)
- Length of rental period (57%)
- Number of bedrooms (50%)
- Transport links (42%)
- Pets allowed in property (41%)
- Garden access (35%).
Implications for landlords
We’ll let you draw your own conclusions, but here are a few points to consider:
· Given tenant concerns about the cost of gas and electricity, energy-efficient features such as double-glazing or solar panels should prove popular.
· Many of the other tenant priorities, such as access to transport and outdoor space, are ‘evergreen’ issues.
· For landlords looking to secure long-term tenancies, it’s worth noting that 41% of tenants view being able to have a pet as an important issue.
If you’d like to learn about our property management services, contact our lettings team at THINK Estate Agents today.
1 Rightmove
2 Hamptons
3 Zoopla
4 UK Renters’ Report 2023, Finbri
