14th Nov 2022|News|Lettings|BTR & Asset Management|

Centrick’s Lettings Predictions For 2023

In the third and last instalment of our forecast series, we’ll be running you through our lettings predictions for 2023. From the increasingly popular Build To Rent market, the chronic undersupply of rental units, and the soaring interest in short-term lets – Centrick will be covering everything you ought to expect for the year ahead.

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A Fast-Moving Market

Anyone listing or renting properties this summer has likely experienced the hectic rush surrounding securing tenancies. It’s no secret that the lettings market is booming, competition for property is fierce, and prices are on the rise. Chief of Propertymark, Mark Hayward, stated in April “we continue to see unprecedented demand from tenants with a record-breaking number of new prospective tenants registered per branch”. This is likely a result of an extreme disparity between supply and demand for property, with the UK seeing a 40% decrease in available listings year on year. This has made competition for rental units fierce and fast, says Centrick’s Lettings Negotiator, who said “the rental market is set to be lightning-fast next year as demand for rental property remains high, making buy-to-let properties a reliable investment for 2023 and beyond. We anticipate that most of our units won’t be available for long before they get snapped up by eager tenants, especially in commuter towns and cities with brilliant job opportunities and exciting lifestyle offerings”. This is despite a significant increase in rental costs over the last year, with Rightmove noting that rents have increased more in Quarter Two of 2022 than they have for sixteen years. This is, in part, due to the return of greater market buoyancy as the pandemic eased, buy-to-let purchases were completed after the COVID-related delays, and the job market stabilised. As the lettings market remains buoyant despite the price increases, Centrick’s lettings predictions anticipates that rental costs will continue to rise as demand stays high and supply remains low.

Affordable Build To Rent

Although there are over 230,000 Build To Rent units across the UK, many of these units are aimed at those with higher budgets, leaving the majority of searching tenants unable to afford Build To Rent properties. At the start of the year, the Guardian noted that the Build To Rent sector was experiencing a ‘Glitzy Goldrush’ funded by high-end banks and conglomerates such as John Lewis, targeting the most affluent renters that may be looking for flexible properties with a variety of amenities, rather than investing their money into a fully-fledged, and more permanent, property purchase. Build To Rent units remain popular, with planning permission requests for new developments increasing by 52% over the past few years.

As more of these developments are completed, we may see rents stabilise as the market becomes more competitive, especially as more are constructed outside of London. However, the nature of these properties, with many offering a range of amenities and services, does tend to lead to an increased ‘service charge’ cost included in the rent.

Longer Tenancies are on the Horizon

Speaking of lettings prices being on the rise, and the rental market becoming increasingly competitive for home movers, Centrick is predicting that existing tenancies will continue to be renewed for the foreseeable future. The risk of concluding your existing tenancy to find a superior property for a more reasonable price is high, especially with supply so low and prices trending upwards. Over the past three years, rental property supply has halved, making it more important for existing tenants to hold on to the properties they already have.

This has been backed up by a report issued at the end of 2021, which concluded that private renters lived in the same accommodation for an average of 4.3 years, with this length increasing to 17.5 years for private renters over 75. This indicates that both tenants and landlords remain comfortable with longer-length tenancies, especially at this time where the housing market is experiencing a significant deficit in supply and Build to Rent units remain largely unattainable for the average tenant. However, there is still significant movement in the existing rental market from those looking for more space and access to the outdoors, following the shift to home and hybrid working for many people.

The Rise of Airbnb

Contrary to the aforementioned rise of long-term lets, extremely short-term lets such as those offered by Airbnb are growing more popular thanks to their unique combination of brief letting lengths and home-style facilities. In fact, some areas have experienced a rise in short-term lets of over 600% from 2016 to 2021 despite the prevalence of the pandemic disrupting our ability to travel. Now that coronavirus has eased and many people feel compelled to experience the holidays they missed out on, it is anticipated that Airbnb and similar platforms will become the holiday rental firms of choice.

Rather than being set within typical hotel complexes, many Airbnb offerings can be found in residential apartment blocks and suburban neighbourhoods, allowing short-stay tenants to experience a different kind of stay that gives them an authentic sense of what it’s like to live in the host’s home. In developments where this type of rental is permitted, these brief lets are becoming a fantastic way for landlords to fill their void periods, with most Airbnb nightly fees earning landlords a substantial amount of money to help them keep their rental yields at an optimal level. They also allow landlords the flexibility to stay at their property during vacant periods, not be burdened with troublesome tenants for long periods of time and alter their prices in line with the fluctuating economy.

Looking For More Lettings Predictions?

At Centrick, our team of dedicated property experts are here to help you make the most informed decision about your future move or investment with our informed lettings predictions, stand-out customer service and regional expertise. Whether you’re looking to rent a new home, invest in the lucrative buy-to-let market, or simply want more tailored advice on the future of lettings in your neighbourhood – contact us via the form below.

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