Letting country homes: will rents continue to rise?
Thu 16 Feb 2023
If you are a landlord, now is the time to start talking to us to make sure you align your investments to attract strong rent levels going forward."
Tiffanie Kerr, Lettings Development Manager, Norwich office.
Just what effect is the economic climate and high interest rates having on the rental market, particularly high-end homes? Will rents continue to rise?
The supply/demand mismatch
Tenants can't afford to buy right now meaning more people are forced to stay in the rental sector causing demand to rise higher. Landlords are being hit by the same economic downturn and higher interest rates and choosing to either divest stock causing even less supply - or put up rents to meet their increasing costs.
With the number of households in private rented accommodation now at 4.6million in the UK - a growth of more than 1million over the past decade - Generation Rent drives a consistent rise in rental prices which is, according to a recent Zoopla report UK Cities See Record High Rent Increases, up on average 11.5% year-on-year.
Forecasts by RICS recently predict rent spikes as high as 15% or more this year.
All of those caught up in this market are looking for a panacea to their woes. Tenants are awaiting the much-debated Private Renters Reform Bill expected later this year giving them extra protection against regular rent rises and eviction as well making certain improvements to accommodation a legal requirement for landlords.
Investor landlords are looking at Build-to-Rent as a potential longer term solution. Meanwhile, more 'accidental' landlords looking to buy their next property are doing so via a limited company for tax purposes.
However, this is a national overview and what do we at Brown&Co really think is the picture locally?
What's happening locally?
What we are seeing is there is still an appetite for renting across the price ranges. Our teams are specialists in the letting of all types of properties but particularly listed country homes which do need special treatment when putting on the rental market to achieve the required top-end price.
For example, despite the market, our Holt office this month let one of the most expensive properties to come to the rental market in this area. Our Residential Sales and Lettings Manager Vicki Foreman let Ostrich House, Wells-on-Sea, Norfolk a fabulous Grade II listed property dating to the Queen Anne/early Georgian period for £3,300 per calendar month.
This coincided with our Holt office also recently letting another superb property, Annerley Bungalow in Foulsham, Norfolk for £2,700 per calendar month.
Tiffanie Kerr, Lettings Development Manager, based in our Norwich office, said: "The rental market started in 2023 much like it ended in 2022 with demand for good quality housing outweighing the supply.
"During the last year we saw a rapid increase of potential tenants enquiring and registering for rental properties. There were fewer properties on the market compared to previous years.
"Nationally, we've seen the highest annual percentage increases in rental prices in the UK since 2006. Demand for rental property has grown over the last five years which has led to an increase in market rents.
"Those tenants who can extend their budget are willing to do so in order to secure a rental property."
"However, there is much regulation forthcoming, particularly the Private Renters Reform Bill expected to be brought into the spotlight at the end of the Government's parliamentary session in May."
"With the focus on pro-tenant legislation and the improvements on rental stock required by law, there are opportunities for occupants in existing rental properties to pursue negotiations on their tenancies.
"For landlords, depending on how house prices continue through 2023, there could be opportunities for them to grow their portfolios further.
"So if you are a landlord, now is the time to start talking to us to make sure you align your investments to attract strong rent levels going forward."
The Buy-to-Let Barometer
A recent 'Buy-to-Let Barometer' for Q4 2022 by the Mortgage Works, a subsidiary of Nationwide Building Society, based on replies from hundreds of landlords, showed that the typical landlord has 7.5 properties in their portfolio and generates an average rental yield of 5.7%. However, landlords are now three times more likely to sell property than buy in the next 12 months.
Norfolk financial advisor Keith Hood, told us: "The report does highlight an increasing number of landlords looking to leave the market - that certainly can't be due to rent levels or tenant demand which are at record levels.
"So, that must mean it's primarily due to rising mortgage costs - however, the other interesting trend is the sharp increase in the number of landlords expecting to buy their next property via a limited company in order to offset their mortgage interest payments against rental income when calculating tax."
Changes are coming in, with a focus on stricter EPC regulation for landlords so now is an ideal time to use a letting agent like Brown&Co to manage your property and ensure it stays compliant."
Tasca Kruse, Residential Lettings Coordinator, Humber office.
In our Humber office, Residential Lettings Coordinators Tasca Kruse and Rosie Croft operate across the region, including the Brigg vicinity after relocating from an office in the town centre. They say average rental prices are currently at around £850 per calendar month - with a similar picture of demand outstripping supply.
As they do still operate in the Lincolnshire region, they currently have one of the area's most prestigious homes, Southfield House, Redbourne, a Grade II listed country house with six bedrooms, for rent for £2,400 per calendar month.
Tasca Kruse said: "Higher mortgage prices are forcing landlords to sell or increase rents in our area and in turn, these increases are causing some tenants to vacate properties. In fact, this month we have started to see some tenants giving notice as they find some alternative properties which has created some movement in the market again.
"However, we are still seeing demand 46% above average and supply 38% lower than average. Changes are coming in, with a focus on stricter EPC regulation for landlords so now is an ideal time to use a letting agent like Brown&Co to manage your property and ensure it is legally compliant."
If you are looking to let your property, or need advice with a current portfolio, please contact our specialist rental teams. Tiffanie Kerr, Lettings Development Manager, Norwich can be contacted on 01603 629871, Vicki Foreman, Residential Sales and Lettings Manager, Holt on 01263 711167 and Tasca Kruse, Residential Lettings Coordinator, Humber (including Brigg) on 01482 421234.
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