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Softening prices, rising rents and new opportunities for investors

We’re entering one of the busiest seasons for the rental market – and for investors – and a number of promising factors are influencing the market. 

Activity in the buy-to-let space remains consistently high, with tenant demand continuing to outstrip the number of rental homes available in the majority of areas across the UK, according to the latest figures. For investors looking at medium to long-term opportunities, the outlook is robust in a number of ways.

The summer months have been busy, with August seeing a significant year-on-year rental cost increase (+10.3%) with rents climbing to an average £1,261 per month, or £1,051 per month excluding London, according to HomeLet’s Rental Index.

Yet it is also traditionally a time when landlords and investors can expect to see greater void periods or tenancies coming to an end, with September being the start of a new term for anyone studying or with school-age children, and many people wanting to make their moves ahead of Christmas.

Therefore, the upcoming couple of months may see an even faster paced market, with more rent rises highly likely. While this is undoubtedly tough on tenants, it can be an opportunity for investors to reassess their local market and ensure their portfolios are performing as they should be at this time.

Surging demand for rental property

The latest data from Propertymark, which surveys its member branches across the UK to determine patterns in the buy-to-let and sales space, shows that 187 prospective new tenants registered per branch in July. This is a huge jump compared with the 127 that registered in July 2022.

Meanwhile, the data shows that the number of properties available to rent per member branch is still drastically below the level of demand, at an average of 14 per branch. While this was a month-on-month increase, it is clear that competition for each property that comes on the market is exceptionally high.

This is something for property investors and landlords to be aware of at the moment. On a positive note, it means properties that are ready to be tenanted are unlikely to sit empty for long; however, it is still just as important to price your property accurately and fairly, and stay on top of your requirements as a landlord.

Most forecasts expect this situation to continue, and many in the industry are urging the government to do more to incentivise investors in the rental market in order to ensure there are enough properties for the huge number of tenants that need them.

Opportunities for investors

Investing in areas of high tenant demand has always been a key strategy for successful buy-to-let landlords, and this is no different in the current climate. However, due to the heightened demand at the moment, this may open up more areas with opportunities.

Data has shown that a higher number of tenants are currently choosing to renew their existing tenancies rather than seek new ones, which is reflective of the current climate of rising rents and cost of living. For investors, finding and keeping good tenants who pay the rent on time can be extremely advantageous.

As always, while “flipping” properties can pay off for some investors, this is a relatively risky strategy, and particularly so in the current environment of softening prices. Nicky Stevenson, managing director of Fine & Country, points out that opting for a longer-term plan can be beneficial.

“For those considering a medium-to-long-term investment strategy, the current market conditions offer optimism,” she says. “Softening sales prices and a downward trend in mortgage rates, coupled with steadily rising rents, continue to provide attractive returns and capital growth prospects for investors.

“ reports that an estimated 41% of landlords own all of their properties outright, while 35% hold all their properties on a mortgage. Those without a mortgage or with lower loan-to-values are in a particularly strong position to capitalise on the current market dynamics.”

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