Looking back at 2023, it’s clear that it posed significant challenges for the private rental sector. However, as we set our sights on 2024, landlords can find several reasons to be optimistic about the future.
While the specifics of 2024 remain uncertain, economists are cautiously optimistic. They believe that interest rates and inflation have reached their peak, and the economy is poised for a recovery.
Let’s delve into what the experts are predicting for the upcoming year.
Continued High Demand: The property market continues to grapple with a persistent gap between supply and demand. The robust demand and high occupancy rates witnessed this year are expected to persist. Zoopla’s forecast suggests a rental growth of 5% to 6% in 2024, following this year’s impressive 9% growth.
Changing Search Patterns: Rising rental costs have prompted renters to explore alternative options. Many are opting to share accommodations, seek residences in more affordable areas, and consider smaller properties. This shift aligns with a long-term trend highlighted by the Resolution Foundation, indicating a 16% reduction in floor space per renter over the past two decades.
Focus on Energy Efficiency: Given the rising expenses associated with heating and powering homes, tenants are increasingly prioritizing the energy efficiency of properties. This trend is anticipated to persist into 2024. Surveys indicate that approximately 57% of renters would be less inclined to consider a property with a poor energy rating (Shawbrook Bank).
Mortgage Market Stability: After experiencing multiple interest rate hikes this year, there are signs of stabilization. The Bank of England’s base rate is currently steady, with projections suggesting it could decrease to 4% by the end of 2024 (Source: Berenberg Bank) and further to 3% by the end of 2025 (Source: Capital Economics). While historical lows may not return, landlords can appreciate a more balanced mortgage market. Notably, the product variety for buy-to-let mortgages has expanded significantly. In October 2022, there were 1,000 buy-to-let fixed-rate and variable products available. A year later, this figure has grown to 2,500 (Source: Moneyfactscompare.co.uk).
Inflation Moderation: Inflation had a noticeable impact on the cost of materials and labor for repairs and renovations this year. However, there are signs of change, with price increases slowing down (October’s inflation rate was 4.6%, down from 6.3% the previous month). Analysts at the Bank of England anticipate that inflation will drop to 2% by the end of 2025.
In summary, while 2023 had its share of challenges, the outlook for 2024 appears promising for landlords in the private rental sector. The anticipated stability in interest rates, a diverse mortgage market, and shifting tenant preferences suggest that the coming year may bring opportunities for growth and success.
*None of us has a crystal ball. The figures in this article are predictions, not guarantees.
