3 rental predictions for 2024
As 2023 drew to a close, our team of lettings experts looked at the three most prominent trends expected in the rental market during 2024.
1. Landlords will have to balance priorities to get the price right
Landlords have faced the challenge of higher buy-to-let mortgage rates in 2023, contributing to rising rents.
In the final months of 2023, the number of rental properties seeing a reduction in asking rent during marketing has ticked up, with 23% of properties now seeing a reduction in advertised rent, compared to 16% this time last year.
A single renter with an average salary spends 51% of their salary on a typical rental home, compared to 49% this time last year, and 46% in 2019.
With rental affordability very stretched, and the uptick in rental price reductions suggesting more renters are reaching an affordability ceiling, landlords will need to balance the need to pay their mortgage with finding a good tenant they can develop a longer term relationship with and who can also afford the rent in their local area.
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.
“Higher mortgage rates have had a knock-on effect for renters this year, as landlords who have faced these higher rates and therefore higher monthly costs, have needed, in some cases, to pass these on to tenants to some extent.
“Many tenants will have a cap on what they can or are prepared to pay in rent, and an increasing number of landlords are having to reduce their advertised rent, suggesting more are reaching this cap. It will be vital for landlords to work closely with a local letting agent this year, who will be an expert in the dynamics of their local area, to help them to find the right tenant at the right rent for their local area.”
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2. Landlords will need to prepare for Renter’s Reform Bill, but may delay green improvements
The Renters’ Reform Bill will mark a substantial change in the way a home is rented to a tenant, and many landlords are considering the potential impact the Bill may have on their individual situation.
The focus of the Renters’ Reform Bill may mean that making green improvements to rental homes takes a back seat for some landlords. The government recently scrapped its plans to introduce a minimum requirement for new private rental properties to have an Energy Performance Certificate of at least a C rating.
In a recent Rightmove survey amongst landlords, a quarter (26%) said they planned to make energy efficiency improvements to properties rated below a C, compared to over a third (36%) last year.
Similarly, of those landlords who have properties below a C, 21% now say they plan to sell them, compared with 33% in April 2023.
Rightmove’s General Counsel David Cox said:
“The Renters’ Reform Bill is now going ahead after several delays in 2023, though the earliest it’s likely to come into effect is the end of this year, and a general election could add further complications.
“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 rental sector is filled with legislation and compliance requirements that agents and landlords need to keep up with, and so the earlier they understand the final contents of the Bill, the better they can prepare.
“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. However with the deadline scrapped and all the attention on the Renters’ Reform Bill, it may be that while focusing on the changes the Bill brings in, considerations about green improvements take a back seat for some landlords.”
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3. Stretched first-time buyer affordability will continue to put pressure on the rental market
Though there continues to be far more renters looking to move than homes available, the gap between supply and demand in the rental market improved throughout 2023.
Each home that an average letting agent advertises currently receives 11 enquiries from renters, compared to 14 at this time last year. Enquiries are typically lower in the winter months compared to the summer – this figure was 25 enquiries per property in August 2023.
At the same time, mortgage rates have been slowly trending downwards, with the average 5 year fixed mortgage rate now below 5% for the first time since June.
However, mortgage rates are likely to remain elevated this year, and saving up a deposit continues to be a challenge for would-be first-time buyers amongst wider cost of living pressures, meaning that there is likely to be ongoing demand in the rental market from would-be first-time buyers who need longer to get their budget and plans in place.
Rightmove’s property expert Tim Bannister said:
“The downward trend of mortgage rates and the improved balance between supply and demand in the rental market are positive early signs for the year ahead. However, it’s important to remember that mortgage rates are still higher than in recent years, and there are still not enough homes available in the rental market for those looking to move. The challenges for would-be first-time buyers are likely to continue to have a knock-on effect for the rental market this year, with some who need more time to save up for their first home looking to rent for longer.”
And the overall outlook for the rental market…
Average advertised rents ended 2023 10% higher in the UK outside of London and 6% higher in the capital than the previous year.
Our prediction for 2024, is that the pace of increases will slow, with advertised rents predicted to be 5% higher by the end of 2024 outside of London, and 3% higher in London.
Keep an eye on our quarterly Rental Trends Tracker, for the latest lettings market outlook. We’ll be updating again in a couple of weeks.
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