Our predictions for the year ahead is that rental increases will be around the 5-7% mark, which is down slightly from the 10-11% in 2022. Looking beyond 2023 they may drop further depending on how effective the Bank of England’s monetary policy is in taming inflation.
As we enter 2023 with caution & optimism there is going to be more pressures facing renters.
The biggest problem is actually finding a home to rent in the first place. Competition for properties is high and rental stock is low. With this increased demand and dwindling supply this has inevitably pushed rents up, which is unfortunately adding to already strained household finances.
Add to this the current energy crisis and you’ve got a recipe for a turbulent market throughout the year and probably beyond. The post-pandemic surge in demand for rental property is showing no signs of slowing down both nationally and in our localities of Congleton and Northwich. The phone seems to ring off the hook every time we list a property. So if you are a have a rental property of a good standard it should not be left empty for more than a short periods of time. If it is you need to ask yourself, are you with the right agent? or is the property over priced?
So why such steep competition for rentals?
First-time buyers are being priced out of the market due to increases in mortgage rates and more stringent lending criteria, not helped by the fallout from last September’s mini-budget. These first-timers are therefore being forced to live in rental accommodation until such time that they can save for a deposit and mortgages become more favorable for them.
So What’s The Good News For Landlords?
It’s not all doom and gloom however as we predict the cooling of the sales market to help stabilise rents for a number of reasons. We will see more investors return to the market to take advantage of falling house prices now that the numbers of more leveraged home buyers are beginning to dwindle. With rental yields improving this will tempt landlords back into the market to take advantage of these better returns. We’re finding more landlords are forming limited companies for tax purposes in light of the Section 24 reforms.
Institutional investors are showing increased appetite in the Build To Rent (BTR) sector which is encouraging for the rental market, especially as they will be energy efficient homes. We’ve had a few enquiries of late about the potential of BTR homes in our territory, which is only good news for our local economy.
The cost of living crisis remains high on the government’s agenda. This will obviously impact household budgets up and down the country as the quest for renewable energy sources continues. Utility costs are showing little sign of abating and earnings are struggling to keep up with the pace of inflation.
One thing for certain is that the sector continues to be buoyant and remains a good vehicle for investment for the long term.
To have a chat about any rental property ideas you may have call 📞01606 783599 and we would be only to happy to help.
