The number of applicant enquiries has remained high this quarter, as a strong labour market, high levels of overseas students and workers returning to the UK, plus a surge in mortgage rates have all driven rental demand. On the other hand, the number of homes for rent remains 30% below average for this time of year1. Inflation and the overall cost of living has made for a challenging market, so the recent announcement that interest rates were to be left unchanged at 5.25% was welcome news and will hopefully see some stability in the housing market.
Tenants staying put
With the surge in mortgage repayments, it’s no surprise that the number of first-time buyers fell by 22% between January and August this year, compared to the corresponding period last year2. Where tenants either surrendered or did not renew their tenancies in 2022, it was largely in order to buy a property. Most offices have noticed a drop-off in this activity in 2023, with more tenants renewing their tenancies – in some cases requesting to fix the tenancy term for two years.
Consider letting if you’ve failed to sell
As house prices have softened, we’ve seen unsold properties returning to the letting market and being snapped up by eager applicants. For example, a 3-bedroom house in Cowley (photo above) where a sale fell through and our team let it within 24 hours of listing at £1,5503. The owner still intends to sell, so a clause was added to the tenancy to allow for sales viewings in six months’ time. Our East Oxford team found the perfect applicant who only wants to rent for six months while they finish their studies. Elsewhere, a 4-bedroom house in Brackley failed to sell over the summer, we listed it at £2,750, and let it to a couple who have since enquired about buying the property in the future.
A new approach to Net Zero
Prime Minister Rishi Sunak has announced that proposed EPC targets will be discarded for now –including the requirement for new tenancies to have a minimum EPC rating of C from 2025. Whilst this will be a relief for some landlords, be aware that the Government continues to aim for Net Zero, so this is still likely to become a requirement in the future. Although the time pressure is off, we continue to encourage our landlords to plan to gradually improve the energy efficiency of their properties. As stated in our last report, more and more applicants are enquiring about energy efficiency ratings, and a Rightmove report found that most renters would pay more for an energy efficient home (see graph).
Smaller properties letting quickly
Smaller properties fell out of favour with renters early on in the pandemic. However, across all offices, 1- and 2-bedroom houses and apartments have been most popular with renters this quarter, letting quickly and at solid rents. For example, a 2-bedroom house in East Oxford at £1,550, which was inundated with calls when listed.
Demand for family homes slows
Families are securing the larger homes earlier each year – perhaps a hangover from having missed out last year due to lack of stock. Many 4+ bedroom properties let quickly and at strong rents in the spring, but the drop in demand for this type of home in Q3 has resulted in rents having to be adjusted in order to secure a let. A perfect example of this is two neighbouring semi-detached houses in Abingdon (photo above). One came to the market in April and was let a week later and the other was listed in mid-June but a let wasn’t agreed until September.
Applicants hedging their bets
Surprisingly in a cost of living crisis, applicants have been applying for a property so as not to miss out, but then continuing their search elsewhere (in the knowledge their holding deposit would not be refunded when they withdraw their application). A 1-bedroom apartment in Oxford was let a total of three times this quarter because the first two applicants withdrew. One office also reported some applicants viewing anything with immediate availability – be it a 2-bedroom apartment in the town centre or a 3-bedroom cottage in a village.
Let with pets
There has been a significant increase in the number of applicants with pets in recent years. Of course, there are some cases where pets cannot be permitted in rental properties but, where appropriate, we do advise landlords to consider them. It is possible to increase the rent for a let with a pet, and our offices have seen many successful lets with pets this quarter, including a 2-bedroom cottage in Chipping Norton at £2,250 (photo above).
Flexibility remains the focus for rents
Overall rents continue to increase. Where the quality is lacking or demand has dipped slightly, rents have levelled out or have even had to be reduced. This highlights the importance of being aware of your target market and remaining flexible to secure a good let. In some areas we are seeing other agents inflating their rental estimate either because they aren’t in touch with their local market, or they just want to win the business (even if the property then sits empty and eventually lets at a more realistic rent later).
Value for money
If people are going to pay high rents they want to live in a high quality property. Over the last three years, there has been a tendency to put off redecoration or upgrades, based on the assumption that the property will let at a strong rent anyway. However, it is not advisable to put off maintaining the condition of your rental property. Properties must be kept fresh and updated – even in a busy market. For example, a studio apartment on Iffley Road had some improvement works carried out between tenancies and achieved a 14.3% uplift in rent as a result; and a 2 bedroom apartment in Jericho (photo above) recently let at a 29.4% increase after bathroom upgrades. It’s better to plan ahead than to carry out works in a rush. If you need to prioritise your budget, a good agent can advise.
Renters (Reform) Bill Delays
Despite the bill making newspaper headlines earlier this year, it has only reached the first of seven stages required before it will become law. With party conferences currently taking place, and the State Opening of the Parliament scheduled for 7th November, we do not think it likely that the second reading will happen before November at the earliest – though the autumn budget may further delay the second reading. We will continue to monitor the progress and prepare our clients accordingly.
1 Zoopla Rental Market Report: September 2023
3 All rents are marketing rents and per calendar month
Published October 2023