I hope you found the information in last month’s newsletter informative, please see below our August newsletter provided to us by our referencing agents Goodlord, with an update on the current rental market.
As always, please get in touch if you’d like further support on what any of these trends or changes may mean for you.
The government may push back the deadline for upgrading properties to an EPC band C
The government has been busy in the past few weeks with a flurry of information about upcoming initiatives that affect the lettings sector.
This includes some good news potentially on the horizon for landlords. Timelines for the upcoming changes to EPC requirements may be pushed back, and landlords may see some leniency in the new council tax rules around empty homes. Plus, new data shows that more guarantors are being requested when referencing tenants.
The government is expected to announce a delay to its plans to increase Minimum Energy Efficiency Standards, according to the Financial Times. Housing Secretary Michael Gove has said that the government is “asking too much too quickly” of landlords. However, we still await confirmation on how much extra time landlords may have.
Consultation on relaxing planned council tax rules for landlords
The government plans to give councils the power to charge a higher rate of council tax on properties that are left empty for longer than a year, rather than two years as is the case now. However, the government is currently consulting on proposals to give landlords an extra six months before becoming eligible for the higher rate. You can find the consultation on the government’s site.
Delay to the second reading of the Renters (Reform) Bill
Although Housing Secretary Michael Gove recently shared that the government would bring forward the Renters (Reform) Bill “shortly”, the Houses of Commons and Lords are currently in recess. That means that the Houses won’t meet to “conduct business” until after 4 September 2023.
More guarantors are being requested than ever before.
More landlords and agents are asking for guarantors on high earning tenants, according to our referencing data, to help ensure more certainty for landlords. In 2020, 3.7% of tenants earning between £25,000 and £49,999 were asked for guarantors. This rose to 5.84% in 2023. More guarantors are also being requested for tenants earning between £50,000 and £74,999, with 1.35% asked in 2020 versus 1.92% in 2022.
Availability is down
Property industry experts are seeing a pattern. Separate data from Zoopla and Property Mark – all released in late 2022 – came to the same conclusion: there are up to 50% fewer homes to rent than the year before.
Goodlord’s data strengthens these findings.
They found that 80% of agents saw a dip in stock availability in the past year.
Demand is rising
At the same time, the private rented sector is seeing increased demand for rental properties. The NRLA11 reported that two-thirds of landlords saw increased demand in 2022. Rightmove data showed enquiries went up by 23% in 2022, and Zoopla showed a 46% increase over five years. Our research also confirmed this trend. An overwhelming 91% of letting agents surveyed saw an increased number of tenants looking for properties. This includes agents surveyed in the Northwest of England, and 94% of agents in the Southeast.
A lack of stock pushing up rents
But we all know that the fundamental issue at play here is the lack of available stock. The direction of market forces suggest that, although we’re still expecting the summer months to be busy, some tenants are sitting tight as the availability of properties to move into runs dry – which is likely to contribute further to increased rents.
COULD THE GOVERNMENT CAP RENTS AT THE ADVERTISED RATE?
Rents are sky-rocketing
A lack of supply and an increase in demand ultimately has led to an imbalance in the private rented sector – with increasing rents that tenants are struggling to afford. The Office for National Statistics reported in December 2022 that rents have risen by 4.2% – the fastest since records began in 2016. A quarter of tenants having had their rents raised in the preceding six months. Our referencing agents Goodlord Rental Index, which analyses more than 20,000 tenancies monthly, saw even higher increases than the ONS. Between January 2022 and January 2023 Goodlord saw rents rise by 8.3% – from £993.83 to £1073.43. Meanwhile, average rents have risen.
by 15% in four years, according to Goodlord’s data from January 2019 (£943 per month) to February 2023 (£1,089 per month). Tenants are also noticing these increases. Data from Market Financial Solutions (MFS) indicated that 58% of tenants saw increases in 2022. Goodlord’s Renting Done Right survey indicated a similar 66% increase. A Goodlord survey of more than 200 tenants in December 2022 showed that rising costs are the primary concern. With 4.6 million private rented households in the UK, rising rents will become a major problem for thousands – if not millions – of tenants in the future.
Why are landlords leaving the sector?
This was particularly noticed in the Southeast, Southwest, and Northwest of England, as well as in Greater London. Meanwhile, an overwhelming majority of agents and landlords believe there will be less supply in the next five years. This underlying negative sentiment is a sign of a market in turmoil.
Increased compliance obligations and the cost of upgrades
This includes increased burdens for houses of multiple occupancy (HMOs) and the cost and complexity of staying compliant. The Government proposal to upgrade private rented houses to an energy performance certificate rating of C is worthy but means potentially unrealistic timelines and high costs.
Land Estates Rental Market Performance over the Past Month
Here’s a snapshot of how our agency performed in July 2023
- We achieved an average rent of £1311.03.
- Our void periods were N/A days on
- Our deal turnaround times were 5 days on average.
- On average the tenants we rent to have an income of £36870.79
- The average age of our tenants is 3 years old.
- Achieved 61 property visits reporting and handled any maintenance issues for our Managed landlords.
We hope that this information was useful to you. As always, please get in touch if you’d like further support on what any of these trends or changes may mean for you.
All the best,
The Land Estates team