Although the turbulence of the last 12 months makes predictions a tricky business, all the factors to keep the rental boom going are in place for 2023. Let’s outline what they are.

Interest rates

From the moment, the Bank of England (BoE) raised interest rates in 2022, there have been eight successive rate rises.

With the current rate at 4% and with every chance it could rise further, first time buyers are finding it increasingly difficult to get on the property ladder. It’s unlikely interest rates will start to fall until next year or, if it’s earlier, when inflation starts to fall significantly.

Supply and demand

So, more and more people will be seeking to continue to rent before buying.

In October of 2022, it was recorded that the amount of available rental accommodation had reached a nine-year low. Sadly, after all those interest rate rises, some landlords are starting to get rid of part or all of their portfolios. So, one part of the supply chain has been compromised. Although, if you are an ambitious landlord, looking to expand, this might be your moment to invest and expand.

Does this mean rents will go up?

This is an intriguing aspect of the rental market.

Rents went up considerably over the last two years – by 15.8% in 2021 and then by 10.8% in 2022. Certainly, in London, rises are expected to continue, especially as mortgage costs continue to rise and landlords are expected to pass some of their costs on. The London market is constantly on the up, with average rents in the area priced at £1989 a month.

Other parts of the country are still on the rise as well – the average rent in Manchester city centre is now over £1000 a month and all the big cities around the UK are seeing unprecedented growth in the rental market, which seems certain to continue.

Will the government intervene?

In a word. No.

The then Housing minister Felicity Buchan said at a meeting of landlords that the government would NOT bring in rent controls. This is good news for landlords.

But there are still cost of living pressures which are affecting tenants’ ability to pay.

Energy prices are still rising. So, inflation remains an issue for tenants, who are seeking to downsize in terms of their ability to pay an affordable rent. Plenty are now seeking to rent a one-bedroom flat. So, whatever rent rises the landlord is going to set should be framed within the knowledge of how the economy is affecting us all.

One downside of these pressures means there are likely to be more and more fraudulent applications from would-be tenants. So, landlords need to be diligent in assessing tenancy applications.

About us

If you have any questions about letting a home in the London area, Atkinson McLeod is here to help.

To find out more about our services and current operations, please get in touch with our expert team today. You can find out how much you could be charging in rent each month on the current market by requesting a free and instant online valuation here.