Will turmoil in the housing market spread to the private rented sector, or will rents be more resilient than house prices?
House prices are widely expected to fall in 2023. The latest figures from Rightmove, Nationwide and Halifax all show month-on-month drops. Experts are divided on how deep the dip will be, with predictions ranging from a token fall to a double-digit crash. However, they mostly agree that transaction numbers will take a significant hit – 37%, according to the chief executive of Spicerhaart.
While 2023 has only just started, the first Rightmove House Price Index of the year shows a 0.9% increase in asking prices compared to last month, as well as a strong bounce in demand after a slow December. However, buyer demand is still 36% lower than at the same time last year.
But experts predict that rents will keep rising thanks to the ongoing supply shortage in the private rented sector. While mortgage rates have now softened slightly from their peak last year, the rise in interest rates also means that some landlords will need to pass on rent rises if they want to maintain their yields. Estate agency Savills forecasts a 6.5% rise in average rents this year, as well as an increase in supply as people decide to let unwanted properties instead of selling at a loss.
However, changes in average rents aren’t the only issue facing the sector. In a recent industry poll, more than two thirds of letting agents predicted that rent arrears would rise this year. An even bigger majority expect more landlords to downsize their portfolios, although falling house prices may put off sales and also tempt new investors into the market as yields grow.
Other housing market headlines
Land Registry staff to strike next month – Estate Agent Today
Demand for multi-million pound homes rockets as weak pound attracts foreign buyers – Property Industry Eye
Number of first-time buyers dropped 9% in 2022 – This Is Money