THE IMPACT OF RENTAL PRICES ON CITY LIVING

The bright lights and big city life have long been an attraction for homeowners and renters alike. Although, this allure did lessen in the early parts of the pandemic as people demanded more space – both internal and external – and many looked to more rural regions.

Urban living enjoyed a resurgence as the pandemic waned, but the old faithful economic cornerstones of supply and demand appear to be bucking this trend once again.

According to recent data from Rightmove, low levels of suitable property, soaring rents, and wider financial pressure caused by increased living costs are fuelling an exodus of renters from cities across Great Britain.

RENTAL VOIDS PLUMMET ACROSS MUCH OF THE UK

After a relatively quiet December and January for the lettings market, February saw some much-needed momentum return to help generate stronger rents and a significant fall in rental voids.

This is according to market analysis from Goodlord which suggested that strong demand among tenants saw the average void period for a rental property in England drop by 26% in February – from 23 to 17 days. The biggest changes were seen in the North West, where voids went from 27 days in January to just 18 days in February – a steep drop of a third (33%).

LANDLORDS' PORTFOLIO APPETITES REMAIN STRONG

There have been quite a few doom and gloom merchants over the years when it comes to the future of the buy-to-let sector. Many of these have been largely dispelled by a private rented sector which continues to grow in size, largely due to the extent of ongoing demand and in the wake of a shortage of quality rental homes across much of the UK.

However, with ongoing fiscal pressure being exerted on landlords and mortgage rates much higher than experienced over the past few years, this has led to further questions being asked over landlords’ appetites to add to their portfolios.

ADAPTING TO AN AGEING POPULATION

In an ageing population, housing demographics are ever-changing.

As the average first-time buyer age rises, so too does demand for a variety of rental properties. In addition, increasing demand from older tenants continues to dispel the outdated myth that the private rented sector is purely the domain of the younger generations. Although this is not a trend which has bypassed the attention of many landlords, with growing numbers realising the benefits attached to having older tenants in situ.

This was evident in newly released data from Paragon which outlined that almost half of UK landlords are prepared to update their property to accommodate the needs of older tenants.

TENANTS AVOIDING LESS ENERGY EFFICIENT PROPERTIES

With the cost-of-living crisis hitting people hard in the pocket over the winter period and beyond, energy efficiency is fast becoming a priority for a growing number of tenants.

This trend was highlighted in new research from Shawbrook which revealed that 58% of private renters would be less likely to look at a rental property if they were aware that it had an EPC rating of D or below.

As part of its Confronting the EPC Challenge report, the study found that young private renters are particularly engaged on energy efficiency, with 72% of renters aged 18–34 saying they always check the EPC rating of a property before making any decisions. This is compared to 52% of those aged over 55 years old.

PRODUCT AND CRITERIA CHANGES EXPECTED TO CONTINUE AT PACE IN EARLY 2023

As I was scanning the Financial Reporter news section on the countdown to Christmas, I came across a pull quote in one article which immediately grabbed my attention. This read "If anyone in the mortgage market was hoping for a period of product and criteria stability then I'm afraid they will have to wait a bit longer."

This came from Knowledge Bank’s CEO Nicola Firth on the back of its monthly criteria index which revealed that the year looked set to end as it started with a vast number of criteria changes across the whole range of product categories.

Merry Christmas and a Happy New Year

From all of us here at Dynamo, we’d like to take this opportunity to thank you for your ongoing support over the course of 2022.

It’s been something of a rollercoaster year with many challenges along the way. However, greater market stability has emerged and after conversations with many lenders, we’ve been encouraged by a host of exciting plans which are already in place for Q1 2023 and beyond.

With pricing trending in the right direction, you can be sure of some increased competition across the BTL sector and plenty of innovation along the way, meaning the BTL market is ready to hit the ground running in 2023.

Whilst we are gearing up for a hectic start, we hope that you get the opportunity to take a break, recharge those batteries and enjoy the festive period. So, here’s to a very Merry Christmas and a healthy, prosperous New Year.

REASONS FOR LANDLORDS TO BE CHEERFUL IN 2023

There’s no getting away from the fact that it’s been a tough year for many people, including landlords, especially over the past few months.

Many landlords are currently facing a tougher time securing the right type of finance in the midst of a challenging BTL marketplace fuelled by limited product choice and rising mortgage rates.

This was evident in the latest mortgage market analysis by Octane Capital which revealed that the number of buy-to-let mortgage products on offer has fallen by 51.1% in the past year, down from 3,264 in November 2021 to 1,595 in November 2022.

STUDENT LETS DEMANDING LANDLORD ATTENTION

Overwhelmed and under-stocked, the student rental market is on the verge of reaching breaking point. This strong statement emerged in research from property developer Stripe Property Group which revealed that there are now three students for every student bed available.

According to the study, there are now 2,180,419 full-time university students across the UK, 8% more than there were prior to the pandemic (2019/20). At the same time, there are just 697,734 student beds available to them and while this has been steadily increasing, the number of beds has grown by just 6% when compared to pre-pandemic levels.

As a result, there are now 3.1 students for every one bed available to them, up from 3 students for every one bed in 2019/20. That’s a current shortfall of almost 1.5m student beds to meet the demand required across purpose-built student accommodation.

EXPEDITING THE GREEN MORTGAGE REVOLUTION THROUGH EDUCATION AND CLARITY

Here at Dynamo, we’re seeing more landlords carefully assessing the pros and cons of new builds with an eye on a more energy efficient future for their portfolios. By this I mean in light of the government’s plan for a compulsory energy performance certificate rating of 'C' on new tenancies by December 2025, and on all rented properties by December 2028. Although, it’s prudent to point out this is not yet set in stone.

This plan has also resulted in a huge amount of talk about how much existing upgrades may cost and with the bulk of portfolios containing large levels of older property types, then landlords have to take these potential costs into account. A factor which is especially relevant as well over two-thirds of landlords reportedly still own rental properties with an EPC rating of D or below.

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