Published: 01/02/2023The rent market will be a fascinating place to be in 2023.
On the one hand, demand for a property to rent has never been higher, with so many people now finding themselves priced out of the buyer’s market because of soaring prices and mortgage rates.
On the other, the average renter is now paying out 35% of their income for the property they live in. With the cost-of-living pressures affecting us all, there’s a need for sensitivity when pricing a potential rent rise.
There are also issues affecting costs pertaining to landlords.
At the start of this year, landlords and renters pencilled in one important day – the 2nd of February. That is when the Bank of England will meet, with a view to either keep the base interest rate at 3.5% or raise it again. There are conflicting reports on what will happen when this meeting happens. Figures released before Christmas showed inflation may have peaked and the eight consecutive rate rises might finally have had an effect and the need for a further raise might just be held for a while. Experts also say that with inflation at 10.5% - still way above the target rate of 2% - another rise is inevitable.
What will landlords do next?
In October, when the flurry of rises took place after the ill-fated Truss/Kwarteng budget, 90% of landlords said they would increase rents or intended to do so. It is, though, not as simple as just passing on the increased rate to the tenant.
Many landlords have tried to be as sympathetic as possible to the pressure that many tenants feel. The cost-of-living crisis has had a profound effect on everyone’s disposable income and some landlords have tried, where possible, to keep potential rate rises to a minimum or freeze them altogether.
It's also instructive to consider the factors affecting landlords – repairs and maintenance costs have risen and they are starting to factor in how much they might need to spend to make sure their property will the new the energy performance certificate (EPC) ratings, which will be mandatory for some properties in 2025.
So, what should the rise be?
The landlord should always bear in mind that renters are unlikely to agree to new increases if they feel they can find a better deal elsewhere. So, when setting your rental values every six months or year, it is crucial to do market analysis of the area, to make sure you are not in the position to be undercut.
In some instances, the landlord and tenant may have a more personal relationship where any increases could be discussed and mutually agreed.
Does it depend on where the property is?
Each region has their own idiosyncrasies and rents have grown at different rates everywhere.
In Scotland, they have got rid of the rent freeze, with rents now capped at a maximum 3% rise. In London, the Mayor, Sadiq Khan, has been calling for a two-year rent freeze to help tenants deal with the cost-of-living crisis. Figures from Rightmove show that, as of November 2022, the average rent in the capital was priced at £2,343 a month. For perspective, in Yorkshire and Humberside, the average rent stands at £790 a month.
Rental values have been climbing in the UK for the last six years. What is clear is that big cities, such as Leeds, have seen the rental prices of their properties rise significantly in the past three years, with the average rent at £800.
In cities like Leeds, where there are two universities and a demand for rental property that students can afford remains high, setting the price fairly remains one of the key decisions a landlord has to make.
Who has the power?
With demand exceeding supply, it is still with the landlords. But tenants are increasingly seeking smaller and cheaper property, seemingly incapable of extending themselves any further.
Here at Dwell Leeds, we are an award-winning agency based in Leeds who aim to make the lettings process simple by providing the highest levels of customer care in our industry, and we can help you to get to grips with your EPC obligations.
For more information on our extensive services for landlords, ranging from basic to a ‘hands off’ fully managed approach, please contact us today.
We also offer an instant valuation tool to give you an estimate of how much you could be charging in rent each month.
We also offer an instant valuation tool to give you an estimate of how much you could sell your home for