TDS Q3 State of the Market Report unveils trends impacting landlords
As we move into Q3 2023, the UK rental market is still adapting to cope with the challenges posed by the cost-of-living crisis.
The affordability factor, the trend of rental prices, and the pressure of supply have emerged as noticeable patterns shaping the landscape. For landlords, it is essential to keep track of these changes to make informed and strategic decisions.
The Tenancy Deposit Scheme's recently published State of the Market Report Q3 2023, sheds light on crucial aspects of the Private Rented Sector affecting landlords across the country.
In this breakdown, we delve into some of the report's key findings, providing valuable insights for landlords navigating the evolving landscape.
Rental costs surge and cities bear the brunt
The report highlights a consistent increase in rental prices within the private market towards the end of 2023.
Across the UK (excluding London), new lets have had a staggering annual increase of approximately 10%. Cities in particular, are experiencing the brunt of this surge.
Over the past year, areas such as London, Glasgow, Edinburgh, and Dundee witnessed rental increases of over 12% for new lets.
As of Q3 2023, Rightmove reports another national record, with the average advertised rent for new properties hitting £1,278 per calendar month outside of London.
A rise in tenancy lengths offers landlords stability and reduces turnover.
When we examine data covering both existing tenancies and new lets, a nuanced picture emerges. The overall annual increase across the UK (excluding London) hovers around 5%.
This data suggests that while new lets are driving a significant surge, existing tenancies also experience a notable rate of increase.
As tenants opt for longer stays in rented properties, landlords, particularly in London, are witnessing a doubling of tenancy lengths.
This shift in tenant behaviour is influencing landlords' decisions on rent adjustments, emphasising the importance of adaptability in the current market.
Navigating the Mismatch between Supply and Demand
Amidst the persistent challenges posed by the supply and demand gap in the PRS, there are signs of potential relief. According to data from Zoopla, there has been a noteworthy shift, with a 20% decrease in demand and a corresponding 20% increase in the supply of properties compared to the same period last year.
Although the demand for rental homes has seen a considerable 20% dip from a year ago, it still stands at a substantial 51% above the 5-year average.
On the supply side, the number of homes available for rent has surged by 20% compared to the previous year, yet it persists at a 30% deficit when compared to the average for this time of the year.
This balancing act allows landlords the opportunity to carefully select the most suitable tenants for their property.
With its 2.7 million renters and a private rented sector accounting for 30% of homes, London grapples with a unique set of challenges.
A study conducted by Savills and the London School of Economics delves into the complexities of the supply problem, particularly in London.
Factors contributing to the shortage include:
• contractions in the buy-to-let market
• heightened landlord costs influenced by policy and economic factors
• Reduced churn in the sector.
Understanding these intricacies is crucial for landlords navigating a market where supply challenges persist despite certain shifts.
Download the TDS State of the Market Report in full for in-depth insights.
The TDS State of the Market Briefing for Q3 2023 provides a wealth of insights for property professionals, agents and landlords. For a comprehensive understanding of the trends shaping the market, download the full report here.
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