With the cost of living crisis and a number of reforms on the horizon, some are beginning to question whether the private rented sector is still a good investment in 2023. Whilst it’s true that landlords will need to invest in their properties and remain on top of their obligations, there are still lots of opportunities to earn a solid return on your investment.
What do landlords need to be aware of?
2023 is likely to be an exciting time for those in the private rented sector. The property industry is looking ahead to the future as several important pieces of legislation are set to be introduced. Meanwhile, at the same time, the UK’s financial climate is posing its own challenges. Here are some of the factors that landlords will need to remain on top of this year:
Rent prices are increasing
The demand for rental properties continues to outstrip supply, causing prices to rise. This is good news for landlords, though it’s important to be wary of the fact that rising rents are currently outpacing salary increases. This places tenants’ finances under strain and, in the worst case scenario, could prevent them from affording the new rents.
Mortgage rates are rising
Increased rates will pose difficulties for landlords with mortgages, driving up the cost of their monthly payments. However, remortgaging at a fixed rate could help to control this for the time being. Plus, increased mortgage rates aren’t all doom and gloom for landlords. With mortgages being increasingly unaffordable for first-time buyers, tenants will need to remain in rental properties for longer.
Energy efficiency reforms are coming
Although energy efficiency reforms are currently working their way through Parliament, the proposed deadlines leave plenty of time for landlords to prepare effectively and plan for any associated costs incurred by upgrading their properties. Privately rented properties will need to meet the EPC Band C standard from 31st December 2025 for new tenancies and from 31st December 2028 for existing tenancies.
The Renters’ Reform Bill is being introduced
For the first time, a set of minimum standards for properties in the private rented sector will be introduced and enforced. The upcoming Renters’ Reform Bill has concerned some landlords, but the new legislation won’t pose any issues for those who are willing to meet their obligations. After all, providing quality housing leads to long-term tenancies and a stable source of income.
What does this all mean for landlords?
- Landlords can charge higher rents, reducing their own exposure to the ongoing cost of living crisis.
- Tenants are likely to remain in their current property at the end of their tenancy rather than look elsewhere in such a competitive market.
- Increased mortgage rates are making it harder for tenants to leave the rental market and get on the property ladder.
- There is a generous lead time before the energy efficiency reforms are introduced, allowing landlords to prepare effectively.
- The Renters’ Reform Bill is introducing new obligations that landlords must be aware of and adhere to. Meeting these requirements will be key to maintaining a positive, long-term relationship with tenants.
Is it still worth being a landlord in 2023?
Absolutely! Although the ongoing cost of living crisis is causing everyone to reassess their finances, it’s important to remember that the demand for property remains high. The UK’s chronic housing shortage means that demand for properties continues to outpace supply and there are no signs that this will change any time soon. The impact of new legislation on the sector remains to be seen, but the aims of both the Minimum Energy Performance of Buildings Bill and the Renters’ Reform Bill shouldn’t concern landlords. Balancing the interests of landlords and tenants will lead to longer and more stable tenancies, giving landlords the reliable source of rental income that they desire.
Trust the experts
Keeping on top of your obligations as a landlord can be time-consuming, particularly if you have a large property portfolio to manage. Partnering with an experienced letting agent can free up your time and help you to maximise the return on your investment. To learn more about the changes on the horizon for landlords in 2023, or to discover how we can help, speak to a member of the Pure Lettings team on 01689 869 164.