Long-term tenants carry a number of benefits to landlords from an investment perspective, and new research indicates renters could be staying in their rental homes for longer.
Property investors operating in the buy-to-let market should keep target tenants in mind, as this can influence the number of void periods – times when the property sits empty between tenancies – you are likely to have.
Each time a tenant moves out, landlords must be prepared to stump up for any interim bills, such as council tax and energy bills. There is also the potential cost and time spent finding and vetting new tenants, drawing up new tenancy agreements, and carrying out inventories and professional cleaning.
The most recent research from the English Housing Survey found that landlords can expect private tenants to stay for an average of 4.4 years, although many in the private rented sector live in their homes much longer than that – with almost a third (32%) having lived in their current home for 10 years or more.
During this time, landlords may have put the rent up from the original asking price, which you can read more about here. However, if you have a “good” tenant, who pays the rent on time and looks after the place, this can be much more beneficial than the expense and hassle of getting a new tenant in, even with higher rent.
High tenant demand means more stay put
According to Propertymark’s latest Housing Insight Report, there are also indications that tenants are more inclined to renew their current tenancy rather than move into a new one in the current climate, which can be good news for landlords.
Tenant demand remains extremely high, says the report, with 89 new prospective tenants registered per member branch in February – a similar level to February 2023. However, rental stock levels have also fallen once more, with less than nine rental homes available on average per member branch.
At the same time, the number of new tenancies agreed in February decreased, which Propertymark believes could be a result of the current supply restraints and the fact that tenants are moving less at the moment, as competition for homes is so high.
It also reported that void periods had fallen slightly in February, too, with landlords seeing an average 2.2 weeks between tenancies at the moment.
More than a third (38%) of member branches in Propertymark’s survey also reported that landlords had increased rents in February, down only slightly from the previous month. This alongside the fact that tenants may be staying on slightly longer in their homes could have a positive impact on rental yields for investors.
Landlords can expect more of the same
Despite the challenges faced by the market due to ongoing higher interest rates compared with previous historic lows, the overall resilience being displayed by the housing sector in terms of prices and both buyer and tenant appetite demonstrate that people are now more accustomed to the “new normal”.
In many parts of the UK, particularly the north of England, house price fluctuations have been minimal, or prices have continued to climb, meaning investor appetite has remained strong and kept the market going. Over the course of 2024, interest rates are widely anticipated to come down several times, which should reduce mortgage rates for landlords further.
For property investors looking to enter into the buy-to-let space, all the indications are that tenant demand is going to remain extremely high for the foreseeable future. If you invest in a suitable property in an area close to amenities and transport links, it is highly likely your property will be snapped up quickly by tenants.
This is backed up by new research from Zero Deposit, which revealed that in Q1 2024, 31.8% of all rental homes listed to rent had already been taken by tenants, showing a 1.5% increase in rental demand compared with Q4 2023.
Sam Reynolds, CEO of Zero Deposit said: “Following the seasonal slowdown seen in Q4 of last year, the rental market certainly seems to be back open for business, with tenant demand climbing across the vast majority of counties during the first three months of this year.
“In fact, in no less than 34 counties, between a third and over a half of all rental properties listed to rent have already been snapped up by tenants, which demonstrates the imbalance between the need for rental homes and the stock available to tenants.
“We anticipate that as we now enter into the busiest time of year for the housing market, tenant demand will continue to climb and this will put further strain on the level of stock available, with this supply-demand imbalance only pushing rents higher.”
If you’re a property investor looking to get started in UK buy-to-let, or to expand your portfolio, get in touch with BuyAssociation today to speak with one of our experienced consultants about the latest opportunities. You can also stay informed on our property news page.
