10 tenant and landlord trends for 2023
Tom Goodman, Managing Director at Vouch, shares just some of the lettings trends expected in 2023, from a boom in build-to-rent properties to more landlords creating limited companies.
2022 was a rollercoaster year for the rental sector - with soaring rents, changing mortgage rates, rising costs of living, and plenty of new legislation - and 2023 is likely to be similar. So, what do the next 12 months have in store for letting agents, landlords, and tenants?
1. More older tenants in 2023
Renting has been traditionally associated with younger people. However, it’s now becoming more common to see renters of all ages. The proportion of 45 to 65 year old renters has increased by 70% in the past ten years, and the 55-64 year old market has doubled - creating a larger pool of prospective tenants for your landlords.
2. An increase in build-to-rent properties
The build-to-rent (BTR) sector is set to double in value by 2028. As BTR properties are built for purpose, they are becoming an increasingly attractive option for investors to make long-term gains. Buy-to-let landlords will need to consider how they can differentiate themselves within this competitive market.
3. Tenants to pay a premium for energy-efficient housing
Landlords will have until 2025 to upgrade all newly rented properties to an Energy Performance Certificate (EPC) rating of C, and until 2028 to update existing rentals, according to government proposals.
The government predicts that upgrades will cost around £4,700 per property - with half of landlords saying they will recoup some costs by raising rents. As these dates are fast approaching, landlords may wish to start investing in the renovations now, to help spread the cost in a more manageable way.
4. Fewer first-time buyers in 2023
Analysis from Aviva suggests that more than a million people are ruling themselves out of the first time buyer market due to pressures caused by the cost of living crisis. Forecasts show that many will aim to wait out the cost-of-living crisis and high mortgage rates.
5. An increase in landlords creating limited companies
Three-quarters of UK landlords have now used a limited company to invest in at least one of their properties. Limited personal liability is a key benefit of incorporation so it’s likely we’ll see this trend rise in 2023.
6. 2023 will see the impact of capital gains tax cuts
From this year the capital gains tax-free allowance will be cut from £12,300 to £6,000 - and then cut again to £3,000 from April 2024. This means that a landlord paying higher-rate tax will be taxed more on a property than before.
7. Landlords exiting the rental sector
Increasing legislation may lead to landlords leaving the sector. The number of landlords looking to sell up has risen by 300% as a consequence of the capital gains announcement. In a recent Goodlord webinar, more than 50% of lettings professionals predicted that landlord volumes would decrease in 2023.
8. Homes lost to the holiday home sector
The number of second homes in England has been increasing at a dramatic rate - with Propertymark estimating that England loses 29 homes per day to the holiday home sector. It’s likely that this will lead to greater competition for vacant homes in 2023.
9. Difficulties to finance buy-to-let investments
Buy-to-let investors may struggle to secure finance as a result of the cost-of-living crisis. The number of buy-to-let mortgage products fell by more than 50% in 2022, exacerbated by climbing mortgage rates.
10. An increase in tenancy fraud
In a recent podcast, Goodlord CEO William Reeve predicted an uptick in fraud for lettings agencies in 2023.
The most common types of tenancy fraud are providing false or doctored identification or false references, with twenty percent of applicants flagged by Goodlord’s anti-fraud technology in 2022 then confirmed as fraudulent.
Landlords and agents not using a dedicated referencing company to complete these checks will need to stay vigilant in the coming months.
Goodlord and Vouch are part of the Goodlord Group. Goodlord also offers a referencing service within its pre-tenancy lettings software for agents. Learn more.