A recent analysis examines the key trends anticipated in the rental market for 2024. Projections indicate a 5% increase in advertised rents outside London and a 3% increase within London by the year's end. Landlords must carefully prioritise to achieve optimal pricing.

In 2023, landlords encountered the obstacle of elevated buy-to-let mortgage rates, leading to an escalation in rents. In the concluding months of the same year, there has been an increase in the number of rental properties experiencing a decline in advertised rent during marketing. Currently, 23% of properties witness a reduction, compared to 16% at this time last year.

For a sole tenant with an average salary, the expenditure on a standard rental home has risen to 51% of their income, as opposed to 49% in the previous year and 46% in 2019.

Given the strained state of rental affordability and the observed increase in rental price reductions, indicating that more renters are approaching an affordability limit, landlords must strike a balance. They need to address the imperative of meeting mortgage payments while seeking a reliable tenant with whom they can establish a longer-term relationship, and who can also afford the local rent.

Fokrul Islam, Managing Director at Victorstone says "Landlords have consistently prioritised the search for a dependable tenant while grappling with the reality of meeting monthly mortgage obligations. The impact of higher mortgage rates has trickled down to renters this year, prompting landlords, in some instances, to pass on these increased costs to tenants to a certain extent."

"Numerous tenants have a limit on what they can or are willing to spend on rent, and a growing number of landlords find themselves compelled to lower their advertised rent, indicating a trend of more reaching this limit. Landlords must collaborate closely with a local letting agent this year, as these professionals are well-versed in the dynamics of their local area. This collaboration will assist landlords in securing the right tenant at an appropriate rent for their specific locale."

The Renters' Reform Bill is poised to bring about significant alterations in the rental process for homes, prompting many landlords to contemplate its potential effects on their specific circumstances.

Given the emphasis of the Renters' Reform Bill, some landlords might prioritize other concerns over making green enhancements to rental properties. Notably, the government has recently abandoned its proposal to mandate a minimum Energy Performance Certificate rating of C for new private rental properties.

"Above all, letting agents and landlords seek clarity to plan for the future and offer informed guidance. The rental sector is fraught with legislation and compliance demands that agents and landlords must stay abreast of, making early comprehension of the final contents of the Bill crucial for effective preparation.

There's a likelihood that EPC requirements, in some form, will resurface soon. Therefore, landlords with homes having lower EPC ratings should remain mindful of this and contemplate potential improvements. However, given the elimination of the deadline and the predominant attention on the Renters' Reform Bill, it's conceivable that considerations about green enhancements may take a secondary role for some landlords while focusing on the changes brought about by the Bill."

While there remains a significant imbalance between the number of renters seeking homes and the available supply, the gap in the rental market's supply and demand dynamics showed improvement throughout 2023.

Presently, each home listed by an average letting agent attracts 11 inquiries from renters, in contrast to 14 during the same period last year. Enquiry numbers typically dip in winter compared to the summer peak, which reached 25 inquiries per property in August 2023. Concurrently, mortgage rates have gradually declined, with the average five-year fixed mortgage rate dropping below 5% for the first time since June.

Despite this positive trend, mortgage rates are expected to stay relatively high this year. Accumulating a deposit remains a challenge for prospective first-time buyers, especially considering broader cost-of-living pressures. Consequently, ongoing demand in the rental market is anticipated from first-time buyers who require more time to align their budgets and plans.

Fokrul Islam added "The decreasing trend in mortgage rates and the improved equilibrium in the rental market are encouraging early indicators for the coming year. However, it's crucial to acknowledge that mortgage rates, though showing a decline, are still higher than in recent years. Additionally, there is still an insufficient supply of homes in the rental market for those seeking to relocate. The challenges faced by prospective first-time buyers are likely to persist and have a ripple effect on the rental market, with some individuals needing more time to save for their first home opting to rent for an extended period."

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