Despite a number of landlords taking stock of their positon in the rental market due to mortgage interest rates rising and press surrounding the possibility of legislation changes, what remains clear is that that tenant demand for properties is still outstripping supply and we expect this trend to continue.
In December last year, 81% of our landlords renewed existing tenancies, securing an average of 12.5% increase in rental income at the time of renewal.
Some may say that the year ahead brings an element of ‘the unknown’ with an impending recession and continued cost of living crisis, however if you’re ready to take a ‘glass half full’ approach, there are definitely opportunities to be had in the lettings market.
Since the budget announcement, the degree of uncertainty lessened and confidence in the market showed signs of a refreshing return.
Previously everyone knew that rates would rise, but questioned ‘when?’ or ‘how much?’ but now, you can work with more reliable, real time numbers making your finances work with today’s rates.
While some landlords have been selling, reports have been greatly exaggerated as more tenants have been staying put, resulting in fewer homes coming onto the market. However, some landlords appear to be disposing of lower-yielding homes in favour of those that offer better returns.
In the last couple of weeks there have been growing calls across the industry for the Government to reverse recent BTL changes ranging from taxation to stress testing. If the Government take such action this could fuel confidence within the BTL market throughout 2023.
London has seen the strongest annual rental growth. This is partly due to the post-Covid return of the type of tenants that traditionally favour living in the Capital; whilst remembering it was also the hardest hit area in the wake of the pandemic.
What to expect now?
Demand is high, with evidence of numerous properties receiving multiple offers within days or a week of coming to market. The slowdown of house price growth is set to encourage rental growth all the way through to 2024; as higher mortgage rates than we have been used to will be likely to keep potential buyers in the rental market for slightly longer than they had originally planned.
*John D Wood & Co. internal data, 2022.
