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NewsInvestmentRental Market Trends Landlords Need To Know

Rental Market Trends Landlords Need To Know

There is currently increased demand for rental property whilst availability has dipped. Growing uncertainty in the real estate market is going to provide some investors with opportunities to grow and develop their portfolios – here are the trends landlords need to be aware of.

There is uncertainty across the UK property market. The mini-budget in September had an unprecedented impact on the economy with the fallout including increasing base rates and mortgage rates. A survey of UK property investors has discovered 25.57% are looking to sell their investment properties. 

However, the same survey found that 50.45% of property investors are planning to invest further in 2023. Investors with 5 or more properties are even more likely to invest in 2023, with 67.92% stating they’re planning to invest next year.

Property bridging finance specialist Finbri comments, “Trends in the rental market are emerging as the market reacts to the Government’s new fiscal direction. Landlords need to remain aware of growing trends within this market so that they are able to capitalise.

“First-time buyers that are unable to get a mortgage are deferring entry into the property market and with the rising cost of living, people are looking towards smaller, more energy efficient properties. So demand is rising and combined with the lack of rental property availability, rents are increasing. The average asking price for a rental property has increased by 11% in the last year. During the same time period, rents in London, already at a premium, have reached £2,343 per month, up 16.1%.

“Even though there is uncertainty, there are significant opportunities and trends to take notice of for property investors.”

Current market trends

High rental demand. Demand for rental property has reached an all-time high, with many landlords inundated with enquiries about available properties. Between Q2 and Q3 in 2022, the number of viewing requests per property increased by 25%, an average increase from 9 to 14 . Following the growing instability in the property market, many are opting to rent over purchase – ultimately leading to strong demand for rental properties. 

Rents are continuing to rise due to the increased demand with many tenants offering above the asking price to secure a property, coupled with the cost-of-living crisis many tenants are now looking to downsize – with the demand for 2 bedroom properties increasing. According to a Hometrack report, 40% less gas is needed to heat a purpose-built flat in comparison to a 3-bed terrace. 

Overall demand for property has risen by around 20%, whilst the number of available properties has dropped by 9%. 

Build-to-rent is increasing. The build-to-rent (BTR) sector is also continuing to boom as developers seek to meet the needs of renters who are looking for long-term stability in the current market. 

Tenants are expecting more for their money with rising rental rates, including lower EPC ratings and technical features, especially with the premiums associated with new-build properties. The community-focused design and amenities found in BTR properties, including gyms and restaurants are a few of the reasons why these homes have increased in popularity. 

BTR is one of the subsectors of the private rental market that is expanding the fastest; as of the end of the second quarter, there were 237,000 more build-to-rent properties – up from 13% from the previous year. 

Property size & energy efficiency. In correlation with increased inflation and the continuation of the cost-of-living crisis – there has been more demand for smaller properties. The consistent undersupply of rental properties indicates that rents will continue to rise. Many in the UK are facing challenges with bills, and with around 25% of private renters receiving housing benefit – it’s not surprising that an increased number of renters are downsizing to reduce their housing costs. 

As a result of the growing awareness of the impact of climate change, there has been an increased focus on energy efficiency in the property market. The Government’s recent announcement to make all new-build homes zero-carbon by 2030 will mean that all landlords will have to make sure their properties are up to standard.

The private rented sector (PRS) is set for significant change in the coming years, with an increasing focus on energy efficiency and sustainability. Tenants are now expecting their landlords to make their properties more energy-efficient, and those who don’t could be at a competitive disadvantage.

Making your property more sustainable doesn’t just make it more appealing to potential tenants – it can also help you to save money on energy bills – a prominent factor during this current market. There are a number of measures you can take to make your property more sustainable, such as:

  • Installing solar panels
  • Fitting double or triple glazed windows
  • Installing insulation
  • Fitting low-energy lightbulbs
  • Draft proofing doors and windows

Location. Data produced by Zoopla has indicated the annual change in rents in the UK and has pinpointed the main areas that have seen the greatest increase in rents. 

The highest change in rents include: 

  1. Manchester, had a 15.5% annual increase, with the average asking price at £893.
  2. Glasgow, had a 14.4% annual increase, with the average asking price at £777.
  3. Bristol, had a 12.9% annual increase, with the average asking price at £1,209.
  4. Birmingham, had a 12.8% annual increase, with the average asking price at £802.
  5. Edinburgh, had a 12.3% annual increase, with the average asking price at £1,021.

The hotspots for investment opportunities: 

  1. Manchester is one of the most prominent for investment opportunities with an average property price of £214,886 and gross rental yield of 8.46%. The demand in Manchester is 1:5, and with an 18.8% predicted growth by 2026, there is a sustained amount of demand that can provide a robust opportunity for investors. 
  2. Liverpool provides an average property price of £143,800 and gross rental yield of 7.15%. By 2026 the predicted growth will be around 18.8%, with around 75% aged 17-29 – this is a prime location for investment. 
  3. Birmingham provides an average property price of £217,659 and gross rental yield of 7.40%. By 2026 the predicted growth will be around 15.9%, with further regeneration efforts expected to take place in the future – Birmingham qualifies as a stable investment. 

London has always been a popular choice for investors, however, in recent years there has been a shift to the North – due to London’s ever-rising prices. Cities such as Liverpool and Newcastle have seen a significant increase in investment over the past few years, and this is expected to continue as more people look to move away from the capital.

Final thoughts

There are a number of trends to consider if you’re a landlord in the current market. By remaining aware of all the trends that are currently emerging and what is expected to remain a prominent feature in the future, you will be able to optimise your opportunities. 

Rising mortgage rates and inflation is becoming an issue for many households in the UK, following the stability of the property market in the future more trends may emerge – particularly in regards to energy efficiency and new-build developments increasing in popularity. 

Sam Allcock
Sam Allcock
With over 20 years of experience in the field SEO and digital marketing, Sam Allcock is a highly regarded entrepreneur. He is based in Cheshire but has an interest in all things going on in the North West and enjoys contributing local news to the site.
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