Room for optimism in rental market despite agents’ gloomy forecast

The majority of letting agents expect to see more landlords leave the market in 2023, against a backdrop of rising arrears and falling house prices.

Goodlord reveals that 58% of more than 160 agents surveyed believe that landlord volumes will drop this year, partly due to the pace of regulatory change. “A lot of the new policies have been deterring or restricting supply – encouraging landlords to look elsewhere for how to deploy their capital,” says CEO William Reeve. “This obviously has an impact on stock.”

Arrears volumes

Agents believe inflationary pressures and the cost-of-living crisis will also be felt in arrears volumes, with 66% expecting to see rent arrears increase by up to 5% during 2023.

Michael Cook, group MD at Leaders Romans Group, believes that a lack of quality rental stock means improved yields due to increasing rental prices and reducing sales prices. It expects to see a reduction in the number of landlords selling, as a result, which will help supply. “The buying landscape will still force many potential tenants into the already-congested rental space, with supply unlikely to catch up to the demand quickly enough,” he adds.

Frustrated sellers

Chestertons says a significant proportion of the new rental properties coming to the market were properties that had previously been up for sale, suggesting that sellers are reacting to the slowing sales market by switching to the rental market. These ‘frustrated sellers’ have added much needed supply to the rental market, resulting in some landlords having to rethink the level of rent they can ask. “We expect these stabilising trends to carry on well into 2023, meaning that rental price growth should slow to around 5% by the end of 2023,” adds COO Richard Davies.