The rental market is experiencing unprecedented changes, affecting both landlords and tenants.
- Rightmove reports record high average rents, with new properties seeing significant price increases.
- Incentives for landlords to invest in energy-efficient upgrades are crucial to maintaining rental supply.
- Supply and demand in the rental market are improving, yet price pressures remain on renters.
- Potential tax changes and stricter energy regulations are influencing landlords’ decisions to remain in the market.
In the current climate, the rental market is undergoing significant transformation. Rightmove’s latest analysis highlights an unprecedented rise in average rents for new properties, setting new quarterly records. Specifically, average rents outside London now stand at £1,344 per month, reflecting a 5.2% annual increase, though this is the most modest growth since 2021. Meanwhile, London itself sees a new average rent of £2,694, up by 2.5% from last year.
Supply and demand dynamics are showing signs of improvement, albeit slowly. Notably, the average number of tenant enquiries per rental listing has decreased to 15 from 23 year-on-year, yet it remains significantly higher than pre-2019 levels, which recorded only 8 enquiries. This indicates a persistently competitive rental market, albeit one where balance is gradually being restored.
A factor mitigating this demand is a modest increase in available rental properties, which is up by 13% compared to last year, although still considerably lower than 2019 figures by 27%. Additionally, there has been a rise in the percentage of rental properties requiring a reduction in advertised price before securing tenants, climbing to 21% from 16% the previous year – the highest such figure since 2020.
Looking towards the future, landlords face potential challenges due to anticipated changes in governmental policy, notably regarding Capital Gains Tax and energy performance regulations. A substantial number of rental homes, currently 18% of the market as per Rightmove’s data, are being sold. This shift is largely driven by forthcoming legislations demanding that rental properties achieve a minimum EPC rating of C by 2030, necessitating potentially costly property upgrades.
Rightmove’s studies suggest a looming financial burden, estimating that nearly 2.9 million rental properties require energy efficiency upgrades to meet these standards, with an aggregated cost close to £23.4 billion, averaging £8,074 per property. Approximately half of landlords express concern over the potential imposition of high regulatory charges for non-compliance with these EPC standards. Meanwhile, a significant portion of renters, 19%, believe that the government should prioritise energy efficiency regulations.
With the market dynamics leaning towards such changes, Rightmove advocacy includes calls for governmental support in the form of incentives for landlords to partake in such energy-efficient upgrades, potentially preserving rental supply and alleviating affordability issues for tenants. As Tim Bannister articulates, there is a discernible market trend of landlords exiting due to fiscal uncertainties and regulatory stiffness, further straining an already tight rental supply.
The rental market continues to face significant pressures as stakeholders navigate record rents and evolving regulatory landscapes.
