MHHG estate agents

The United Kingdom's rental market has experienced significant developments in the year 2023. Key trends in rental growth and landlord compliance have shaped the landscape, reflecting changes in demand, property values, and energy efficiency improvements. This report provides an overview of these trends and their implications.

Rental Growth

Rental prices have been on an upward trajectory, demonstrating resilience and growth throughout 2023. In September, the average rent for newly agreed rental contracts reached £1,276, representing a remarkable 10.1% year-on-year increase. This increase in rental prices is notably strong in the prime rental market, with areas like the South West witnessing impressive growth rates of up to 14.2%. Rental growth is anticipated to continue, reaching a 9% increase by the end of the year. Subsequently, the pace of growth is expected to taper off to a more sustainable 5-6% in 2024.

One striking aspect of the current rental market is the persistent demand from tenants. Agents across the UK have reported overwhelming interest, with three-quarters of them noting more than 11 applicants per average listing, and an astonishing 45% experiencing over 20 applicants. Despite the robust rental growth, over two-thirds of surveyed agents have not observed an increase in renters falling into arrears. This suggests that renters continue to manage their rental obligations effectively, even in the face of rising costs.

Landlord Compliance

In a significant policy development, the proposed regulation to mandate a minimum Energy Performance Certificate (EPC) rating of C for new tenancies by 2025 and for all properties by 2028 has been scrapped. Nonetheless, research indicates that UK landlords have shown a proactive approach to compliance. An impressive 80% of landlords have made preparations to meet these requirements, and nearly half of them have invested substantial amounts ranging from £500 to £20,000 in property improvements and upgrades over the past year, according to Shawbrook Bank.

This investment is not expected to be in vain, as enhancing energy efficiency is likely to make properties more appealing to renters. As per the Dataloft Property Academy Renter Survey 2022, 78% of renters have emphasized the importance of the EPC rating when making rental decisions. This signifies that landlords who have invested in energy-efficient upgrades may enjoy increased demand and competitiveness in the rental market.

Conclusion

The United Kingdom's rental market in 2023 has been marked by robust rental growth and proactive landlord compliance with energy efficiency standards. Rental prices have surged, with prime markets such as the South West witnessing substantial increases. Demand remains strong, indicating a healthy and competitive rental landscape.

While the regulation regarding EPC ratings has been shelved, landlords have taken it upon themselves to make energy-efficient improvements, which are expected to make their properties more attractive to renters. These developments demonstrate a dynamic and evolving rental market in the UK. As we move into 2024, it will be essential to monitor how these trends evolve and adapt to changing economic and regulatory landscapes.