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- February 26, 2023
- Real-estate
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- 02 Mins
Over the past few years, the property market has been quite unstable, and the rental market has also seen some significant shifts. Many landlords have withdrawn from the market due to rising costs and additional regulation, resulting in a decrease in rental properties available while demand has been increasing. As a result, rental prices across the UK have risen by an average of 11.1% for new rentals in the last 12 months, while existing rents only increased by approximately 3.8% year on year, according to the Office of National Statistics.
Looking forward to 2023, the rental market’s future remains uncertain. Several factors are affecting the supply of rental properties, such as increasing mortgage rates, more regulation on rented properties, and changes in capital gains tax and tax relief on buy-to-let mortgages. These factors are causing some landlords to sell their rental properties, which will negatively affect supply. However, higher rents, increased rental demand leading to limited void periods, and falling property prices could negate this effect. Additionally, research by Simply Business indicates that 61% of landlords sold a property in 2022, or they are planning to sell a rental property soon, while only 23% of landlords plan to purchase an investment property to rent out. However, some landlords are holding off on selling their properties, and private companies are building build-to-rent properties. As a result, the supply reduction caused by private landlords leaving the rental sector has been somewhat mitigated, with over 237,000 build-to-rent properties in the UK.
On the other hand, the demand for rental properties remains high, particularly since many potential first-time buyers are holding off buying due to rising mortgage interest rates and the cost of living crisis. In October 2022, first-time buyer demand was down by 20%. In contrast, demand for rental properties was up by 46% in 2022 and is expected to remain high in 2023.
This imbalance in supply and demand is driving up rent, making it challenging for renters to afford. Currently, single renters spend an average of 35% of their income on rent, which is above the 30% considered rent burdened. According to the ONS, 39% of renters were struggling with rent payments between June and September 2022. As a result, younger tenants may opt to stay home longer or share properties with others, potentially weakening demand and balancing out the market.
While the rental market is expected to remain profitable in 2023, there is likely to be an imbalance between supply and demand. The rental market’s supply network is shifting from being primarily private landlord-focused to developer-focused, as new legislation and financial pressures make private renting less attractive for some landlords. Demand is expected to slow as 2023 progresses, making renting less affordable, potentially balancing out the market’s supply and demand and cooling it down.
It’s essential to note that these are just predictions, and the rental market remains uncertain. However, the property remains a profitable endeavour, and Roomify’s highly experienced landlord-focused teams are dedicated to supporting our landlords in any way possible, regardless of their individual circumstances.
