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2023 is shaping up to be one of the busiest years we have experienced in the UK rental market. If you live within the Telford area, and have been looking for a new property to rent, then you will know how competitive the market is. You might also have noticed that prices seem to have increased dramatically over the last couple of years.
We asked Katie Hatten, Foden Property’s Director, to answer some of the most frequently asked questions regarding the UK rental market in 2023.
Why has the rental market become so competitive?
The simple answer is that the demand for rental properties is massively outstripping the supply. For every rental property which comes onto the market we are regularly receiving up to 10 applicants for that home. This makes it incredibly tough for tenants looking to secure a new place to live.
Is the lack of rental properties the reason rental prices are increasing?
One of the reasons monthly rents are increasing is due to the lack of supply of rental properties. Landlords can now charge much higher monthly rental rates as they know there are plenty of people willing to pay a higher rate to secure a new home.
Rising mortgage interest rates are also having a dramatic effect on monthly rental rates. Many landlords are having to raise rents in order to cover the cost of their rising mortgage payments. In many cases this is pushing monthly rents up to levels higher than we would expect in a natural market.
Does this mean monthly rents are outpricing potential tenants from the rental market?
Yes, unfortunately in some cases it does. Many people are currently having to reevaluate the size and type of property which they can realistically afford to rent. Previously you might have been able to afford a three or four bedroom home, whereas now some renters are struggling to afford a two bedroom property.
We are also noticing that traditional “cheaper areas” are no longer cheap. Rising rents are affecting the whole of the market and not just the more expensive or desirable areas. Another important factor for many renters is the fact that their monthly salary is not keeping pace with their rising rent and other household bills.
What about tenants who are in receipt of benefits - are they still able to find homes with private landlords?
Yes, they are. The guidance states that you shouldn’t be discriminated against just because you are on some form of benefit. However, where the difficulty comes at the moment is with affordability. There is a misconception that people are being excluded from properties because they are on benefits. However in reality they are unable to rent properties because they can’t afford to pay the rental prices.
As a general rule, you need to be earning roughly two and a half times your monthly rent in order to pass referencing. For example, to afford to rent a property for £800 a month, you will need to be earning roughly £25,000 per year.
Unfortunately as neither people’s salaries or benefits are rising as much as monthly rents and other bills, it is putting a lot of properties out of reach.
Where do you see the rental market going in the next 6-12 months?
The rental market needs to stabilise and correct itself at some point as otherwise too many people will be continually priced out of the market.
At the moment we have the perfect storm of lack of available property; interest rate rises and high inflation. Whilst at the same time salaries for most people are just not keeping up with these rises. On the other side, many landlords are needing to increase monthly rents just to make it worthwhile for them to keep offering properties for rent. This is obviously not a good long term solution for either landlords or tenants, so something has to change.
The rumours currently circulating within the industry are that we might have reached the top of where interest rates are going to go. Unfortunately this doesn’t mean that your monthly rent will decrease in price. The only way rents will naturally decrease is when a property comes back out on the open market and the market naturally pushes the price down.
Are you optimistic for the long term future of the rental market?
In the longer term, the only thing that will control the rental market is to have more housing stock for rent. We need more landlords to come into the market and we need more incentives for them to do so. More landlords will obviously mean more choice of properties for renters which will in turn make prices fairer and more affordable for prospective tenants. As ever, we remain optimistic that the rental market will naturally correct itself in the longer term.
For a more in depth look at the UK rental market in 2023, watch our latest podcast episode with Katie Hatten and Sales Director Jenny Waite.