Can the rental market sustain its current boom?
Making predictions in the current economic climate is challenging, but it seems likely that the rental market will continue to thrive in 2023. There are several factors at play.
Interest rates
Since the Bank of England raised interest rates in 2022, eight consecutive increases have occurred. With the current rate at 4%, first-time buyers find it increasingly difficult to get onto the property ladder. Interest rates are unlikely to decrease until inflation falls significantly, which is not expected to happen until next year at the earliest.
Supply and demand
There is currently a shortage of rental accommodation, with the number of available properties reaching a nine-year low in October 2022. Unfortunately, some landlords are selling off part or all of their portfolios due to rising interest rates, compromising the supply chain. However, ambitious landlords looking to expand their portfolios may see this as an opportunity to invest and expand.
Will rents increase?
Rents have increased significantly over the past two years, with a rise of 15.8% in 2021 and a further increase of 10.8% in 2022. In London, rents are expected to continue to rise due to the increase in mortgage costs and landlords passing on their costs. The rental market in other parts of the UK is also growing, with Manchester city centre seeing average rents of over £1000 a month.
Will the government intervene?
The government has no plans to introduce rent controls, which is good news for landlords. However, tenants feel the pressure of rising energy prices and inflation, which may affect their ability to pay rent. Many are downsizing to one-bedroom flats to make their rent more affordable. Landlords need to be vigilant in assessing tenancy applications as the pressure on tenants may increase fraudulent applications.
