All aboard! Though the wind pressure may be high, it’s time to drop anchor and set sail on HMS Davies (aka Davey McDave Face). With our expert foresight, we’ll help you reach calmer waters out there in the daunting rental ocean – navigating through the current storm of economics and regulations. Fortunately, London’s rental market is showing signs of stabilising in 2023/24, but there are a few icebergs out there in the big blue to keep a beady eye on. So without further ado sailors, let’s dive right in.
Sales vs rentals: a classic ebb and flow
The housing market has two distinct currents. On one end you have sellers wondering whether prices will plunge like a rock into the oceanic depths and how far. While those sailing the rental seas have the opposite concern… the cost of renting a vessel is escalating, and finding safe harbour has become more treacherous in the last five years than ever before. The most recent Zoopla rental index navigates an 11% surge in average residential rents over the course of the last year. A swell of close to 20% since the pandemic began. Port cities such as Manchester and London have been hit hardest by this tide, seeing their rent costs rise by nearly 15%, more than double the growth rate for average earnings. Oof. Even at the lower rung of the rental-growth ladder, tenants are feeling forceful winds, with rents rising between 5-7% in only a span of 12 months. Aye aye captain, that’s a low blow. But is it all doom and gloom for renting sea dogs?
All hands on deck – a tidal wave of demand for rented homes
The competition for rental homes increased after the economy set sail again in mid-2021. People swarmed back to work in the cities like sailors to port, rum in hand. Ready to make waves at the office once more. Around the same time, ye olde Government yanked back the boat’s anchor and eased visa rules to bring students and postgraduates aboard their vessel towards British shores. There simply wasn’t enough student housing for all those eager beavers. So they started searching for vacant cabins to rent. Generally, over 350,000 renters would man the oars each year; however, due to rocky mortgage rates, some never made it across the property ocean. This caused a reduced supply of cabins on dry land, while demand continued sending ripples through the rental tides. Pass us that rum, Bob, we’re feeling a little sea-sick!
Are rentals sailing too close to the wind?
The rental market has seen steady waters since 2016 with a mere 1% rise. Even though there is a considerable float up in demand for leased dwellings (50% above the 5-year average), most estate agents are listing 33% fewer vessels. To make matters worse, voyagers are staying in their berths longer, averaging over four years. The total number of privately rented abodes in Great Britain stands at 5.6 million (up from 5.5 million in 2016). With private landlords owning the majority of these. Regulations and taxation changes have meant that fewer private governors are investing, while some have opted to dock their crafts instead. As a result, those selling boats are hindering any buoyancy. This sudden change is vastly different from what was observed between 2000-2016 when the rental market doubled in size. Don’t keel over yet, Kev! There’s more to discover…
In deep water without a tenancy agreement
Oh, buoy it’s scary out at sea. The turbulence of the rental waves have been raging for some time now. With seemingly few choices to seek safe harbour in sight. A flurry of new regulations have been unleashed. Bringing higher standards aboard and stronger protections for tenants against their landlords. With unfriendly loan rates doing much to discourage land-lubbers from entering the market, a proposed requirement that all dwellings attain an energy efficiency rating of C or greater by 2025 has cast many properties in doubt. Forcing them to raise anchor and abandon their vessels altogether. To provide some respite, build-to-rent fleets have set sail; however their boats account for less than 5% of all available rented homes. The horizon may seem bleak, but all is not lost Jimmy lad! Let’s rock this boat…
Heave ho! Cooler waters ahead?
Steering our way forward, it is anticipated that rental growth will decelerate to 4-5% over 2023. Our trusty forecaster sees demand level cooling off and fewer landlords selling up, bolstering supply. Phew. Affordability will become a burgeoning bastion. It’s not plausible for rents to surge further than earnings for an extended time period. Recent data reveals the ratio of rent to average income (for a single pringle out at sea) is higher than it has ever been in the past decade. Crikey. The situation is not as dire in London as it was during its peak in 2015, yet compared to the national average, these rents remain quite expensive. So what does that mean exactly? While the slowing down of rental growth will be a hearty relief for renters, there must be an increased amount of housing supply in order to improve overall rental market conditions. The government is tightening its ship to help improve certain standards, but must also encourage landlords to keep investing as it boosts the country’s economic state. We’re not ships in the night Edith, we’re all in this together!
So as you see, it’s not all dead in the water for renters in the coming months. With governmental focus and the market is looking to shipshape, stemming the rocky tides. A more copper-bottomed future beckons, as rentals growth slows. Don’t be all at sea! If all this talk has given you wobbly sea-legs, just wave your flag, sound the horn and give us a call (or drop in) for more expert advice from HMS Davies.
Please note that all content contained within our website is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. All Content on this site is information of a general nature and does not address the circumstances of any particular individual or entity. We advise seeking professional advice from a legal, financial, or other professional.
Contact us:
alex@daviesdavies.co.uk – Lettings Director (contact for lettings and property management)
mark@daviesdavies.co.uk – Sales Director (contact for sales, new homes and chartered surveying)
020 3820 2492
Davies & Davies Estate Agents, 85 Stroud Green Road, London, N4 3EG
Article & images by Barefaced Studios
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Well, well, well, 2023 was quite the rollercoaster for our dear housing market wasn’t it? Prices dropped for the first time in over a decade, leaving homeowners in a bit of a tizzy. But fear not, sellers – it’s not all doom and gloom for 2024. Research has shown that despite the fall in prices, 93% of sellers still made a profit. Who says those pesky avocado-smeared millennials can’t be homeowners, eh? Now let’s get to the juicy part: how much moolah did these lucky sellers make? Well, the average gross gain was a whopping £74,000. That’s enough to pay off your student loans and still have some left over to feed your secret chipotle habit.
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