Rental market expected outperform sales market over next 5 years

  1. An average of economists and housing market commentator forecasts over the next 5 years expect the rental market out perform the sales market, at 3.3% compared to 0.9% per year.
  2. The sales market could see falls in average prices of homes by -7% by the end of 2024 but growth is then expected to return and average 3.8% per year between 2025 and 2027.
  3. In contrast, the rental market is anticipated to see its strongest rates of growth in 2023 and 2024 (4.4%) before stablising at 2.5% per year for the three year period 2025 to 2027.
  4. Housing markets that are less reliant on mortgage finance could record higher than average levels of growth. Improvements to the cost of borrowing may also result in a boost in demand in the sales market.Source: Dataloft, OBR, HM Treasury (Independent average), JLL, Savills, Knight Frank, CBRE, Rightmove, Zoopla

House prices have gone through the roof in recent years, but they are now falling amid soaring inflation and rising interest rates. Whilst landlords are raising rents to try and counter increased mortgages, they are still managing to find tenants capable of paying these higher rents. Ultimately, with the cost of living crisis, many people just can’t afford to get onto the property ladder to own their own homes.

Buying V Renting

Whether to buy or rent a home to live in is hard to decide. There are members of the public who prefer to rent as it can provide a chance for the individual to reside in a house in a premium area which would otherwise cost a lump sum if bought. A purchase can take on average 3 months whereas renting allows a prospective tenant to be in their new home within a couple of weeks. When you own a home, any repairs or maintenance are down to you and could be costly. When renting, in most circumstances, the repairs and maintenance do not cost the tenant.

One of the main reasons to buy a home is that it is a long-term investment. With every monthly payment, you are one step closer to paying off your loan, rather than simply paying your landlord. Another significant benefit of buying your own home is that you don’t have to worry about the risk of your landlord suddenly asking to end the tenancy. Buying your home offers more security than renting, which can help you to feel more comfortable. Having the thought in the back of your mind that you might have to move home at any time can make it hard to get attached to a property.

Rental market forecast:

Looking at the above figures, for the next few years you will see the rental market thriving with its increase of 4.4% in the next couple of years then stabilising to 2.5% With prospective buyers still struggling to save deposits, if demand for rental property remains high and prices keep rising in 2023 the opportunity for landlords to generate higher rental yields will continue to increase.

Whether you are renting or you are thinking of buying, there is an ideal property for everybody. You will have to look at it on your own personal merit and circumstance. If you want and can afford to own your home, bricks and mortar still remains a great long-term investment and in most instances, mortgage payments can often be cheaper than paying rent.

Leigh Thomas – Truuli Property Expert

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What is the most popular search criteria…

  • ‘Bills included’ is the most popular search term for renters seeking to find a new place to call home. Renters are keen to have certainty on their monthly outgoings as the cost-of-living squeeze continues.
  • While in 6th position in 2021, ‘bills included’ has now overtaken those prioritising pet-friendly properties or those looking for outside space, either a balcony or garden.
  • A survey of over 12,000 renters by HomeLet and Dataloft found nearly half of renters currently use or are interested in buying a utilities package from their letting agent, a far higher proportion than those using or interested in contents insurance or a tech package.
  • The new Prime Minister has confirmed energy prices will be capped for households until 2024, which could curb inflation growth by up to 5%, and bring inflation back down below the government’s target sooner. Source: Dataloft, Rightmove, 2022, based on Keyword Sort, August 2022

In 17 Years of estate agency, I have always noticed that the criteria renters most look for seems to be close to a station to get to work. Then I would say a property being able to take pets would be next as it seems everyone has a pet these days.

I am surprised to see bills included is the most popular search, i can though now see why it would be high up in the search criteria as lot of people may be working to tighter budgets and would want a place that comes with the bills included.

Our lettings department has been very busy over the last year or so, if you are thinking of renting out your proeprty or looking for some where to rent please call 0330 043 0002 and speak with one of our local property experts.

Leigh Thomas – Truuli Property Expert

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Are rising rents putting pressure on younger renters?

  • With the rising cost of living dominating the headlines, we have turned our attention to the rental market and the affordability pressures facing renters. Using gross incomes of renters and achieved rents we can see how much renters are really spending on rent.
  • As featured in a recent BBC report, 4 in 10 young renters (aged under 30) are now spending at least 30% of their income on rent, the widely accepted affordability threshold.
  • While all living costs are under intense scrutiny at the moment, most renters will be prevented from overstretching on their rent commitment, by the stringent tenant referencing process.
  • To pass the affordability test for tenant referencing on a new lease, the rent should represent no more than 30% of a renter’s gross income. This affordability analysis is based on data from around 40% of all new rentals. Source: Dataloft Rental Market Analytics

The rising cost of living has not stopped prospective tenants from making offers over the asking price on properties. As well as inflated offers, I am still witnessing multiple offers on properties. I believe this is due to the ongoing lack of rental properties being offered to the market in good condition. This has led to tenants being almost desperate not to lose an opportunity once they have sought out a property of interest.

With all that is going on with monthly household bills on the rise, I would have anticipated tenants making lower offers or for the market to have slowed down. However, at present, this has not deterred tenants from securing their ideal rental property at a higher price. With this said, I do believe the current affordability test for tenant referencing needs to be reviewed as the majority of tenants still find it hard to meet the necessary requirements.

Leigh Thomas – Truuli Property Expert

Are rising rents putting pressure on younger renters? Read More »

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