Rental Trends to Watch for in 2023: Insights from the Expert
The rental sector has seen significant changes and challenges in the past year, and it is expected to continue in 2023.
1. Older Tenants on the Rise:
Renting is no longer just a popular option for younger people. A growing number of older adults, between the ages of 45-65, are choosing to rent. In the past decade, the number of 45-65-year-old renters has increased by 70%, and the 55-64-year-old rental market has doubled. This means a larger pool of prospective tenants for landlords to consider.
2. Build-to-Rent Properties Becoming More Popular:
The build-to-rent (BTR) sector is set to double in value by 2028. Properties built specifically for renting are becoming an attractive option for investors, and landlords will need to differentiate themselves within this competitive market.
3. Energy-Efficient Housing to Command a Premium:
Landlords have until 2025 to upgrade newly rented properties to an Energy Performance Certificate (EPC) rating of C, and until 2028 for existing rentals. This upgrade is estimated to cost around £4,700 per property, with half of the landlords planning to recoup some of the costs by raising rents. Landlords may want to start investing in renovations now to spread the cost in a more manageable way.
4. Fewer First-Time Buyers:
Analysis from Aviva shows that over a million people are ruling themselves out of the first-time buyer market due to the cost of living crisis and high mortgage rates.
5. Rise in Landlords Creating Limited Companies:
The number of UK landlords using limited companies to invest in properties has increased, with three-quarters of them using it for at least one of their properties. The key benefit of incorporation is limited personal liability, so this trend is likely to continue in 2023.
6. Capital Gains Tax Cuts to Have an Impact:
The capital gains tax-free allowance will be reduced from £12,300 to £6,000 in 2023, and then again to £3,000 in April 2024. This means higher-rate tax paying landlords will be taxed more on a property than before, leading to an increase in landlords exiting the sector. There are predictions that landlords volumes will decrease in 2023.
7. Homes Lost to the Holiday Home Sector:
The number of second homes in England is increasing rapidly, with England losing 29 homes per day to the holiday home sector. This may lead to greater competition for vacant homes in 2023.
8. Financing Buy-to-Let Investments to be Challenging:
Buy-to-let investors may find it difficult to secure finance due to the cost of living crisis. The number of buy-to-let mortgage products has fallen by more than 50% in 2022, and climbing mortgage rates are exacerbating the issue.
9. Increase in Tenancy Fraud:
The most common types of tenancy fraud include false or doctored identification and false references. Landlords and agents not using a dedicated referencing company to complete these checks need to stay vigilant. At Silver Oak Property Ltd, we thoroughly vet our tenants through our Canopy Referencing portal. This includes performing credit history reviews, income verification, and landlord references. This process helps ensure that the tenants renting properties through us are both trustworthy and financially stable. The information gathered during this vetting process also helps to prevent potential fraud and other issues that may arise during the tenancy. If you're looking to rent out your property, please don't hesitate to contact us.
In conclusion, these are some of the most important trends to keep an eye on in 2023. By staying up-to-date on these trends, landlords can remain competitive in the market and provide the best possible experience for their tenants. Whether you're a landlord or a tenant, it's essential to stay informed and adapt to the changing landscape of the rental market.