What does the PRS face after rate hold and rising rents?

In a private rented sector under pressure from rising costs and increased regulation, the decision last month by the Bank of England’s Monetary Policy Committee to hold the interest rate at 3.75% for the sixth meeting in a row was good news. It means greater certainty of mortgage rates and other associated costs – for now at least. It comes as rents continue to rise in the sector. Zoopla’s latest rental report, published in September, showed rental growth of 2.6% in the last year, with the average UK rent now £1,343. The company expects UK rental growth to hit between 4-5% by the end of this year but also admits the current 2.6% UK rental inflation figure isn’t actually reflective of what’s happening for the vast majority of tenants, with rents rising faster than that in 75% of local areas. So, what’s causing the rise? Supply continues to be an issue that’s pushing up prices, with 25% fewer homes available to rent than before the pandemic. The number of homes available is 3% lower than a year ago, according to Zoopla, with the flow of new homes coming up for rent 6% lower than a year ago. The imbalance of supply and demand therefore remains. With 5.3 enquiries per rental home, the number of prospective tenants chasing properties is at its highest level in nearly two years. The problem is even more serious in areas where the imbalance of supply and demand is at its most stark, including London. This is good news for landlords looking to increase their rental income, or those looking to expand portfolios as smaller landlords reassess their ownership. But the interest rate hold may only be temporary and if a rise doesn’t come before the end of this year, up to four are rumoured for 2027, which will put both landlords and tenants under increased strain as costs rise and affordability ceilings get closer. And it’s not the only challenge that the private rented sector faces.

New costs as PRS Database rolls out

The rollout of the PRS Database, another feature of the Renters’ Rights Act, will begin before the end of this year. The mandatory registration is another job for landlords to manage and is also accompanied by yet another annual fee.

Greater scrutiny as council powers increase

The Renters’ Rights Act has also increased powers for local authorities and councils to investigate landlords and to enforce penalties or order rent repayment orders where applicable.

Energy efficiency requirements are changing

By 2030 landlords must improve the energy efficiency rating of their property to an EPC C rating, unless they are eligible for an exemption. Recent research by the National Residential Landlords Association (NRLA) found that 28% of landlords were unaware such exemptions existed and only 2% had registered an exemption in the last two years. How properties are assessed for an EPC is also changing.

Uncertainty ahead of the budget

The PRS is also nervously awaiting the autumn budget at the end of this month, and the impact they will have on the sector. Stay ahead of the market. Speak to Eden Estates today about maximising your rental returns.