High demand, rising house prices, fluctuating mortgage rates and economic uncertainty have made it much more difficult to get on the property ladder in the UK over recent years. The result is an increase in the average age of first time buyers and a generation who are likely to spend longer in rental properties than their parents.
According to peer-to-peer lender Landbay, millennials are now expected to spend more than £100,000 on rent before they buy their first home. Landbay estimate that those who never manage to take that step onto the ladder and purchase their home, can expect to pay a massive £1.1m to landlords in rent during their lifetime, a sum which increases to £2.6m if they live in the capital.
It comes as no surprise then, that over 40 per cent of young people believe they will never step onto the property ladder and could become lifetime renters.
It’s not just renters who are feeling the impact. Recent tax changes, including withdrawing mortgage interest tax relief for higher rate taxpayers and abolishing the ‘wear and tear’ allowance, plus the recently imposed three per cent stamp duty surcharge for those buying a second property, have made it less profitable to be a landlord. This has caused some buy-to-let investors to reduce their portfolio or exit the market altogether.
The tenant outlook
Young people renting, often find themselves trapped within a cycle of paying rent whilst trying to save for a deposit. This won’t be helped by the rental increases that 67 per cent of renters and 58 per cent of agents believe will happen in 2018, according to ZPG’s State of the Property Nation Research. This could be linked to changes in lettings fees and demand for rental properties outstripping supply as more renters enter the market.
Over 40 per cent of young people believe they will never step onto the property ladder and could become lifetime renters.”
With uncertainty around their future outgoings, many renters are concerned about their personal financial situation. This suggests that renters are already starting to feel the pinch of rising rents and the increased competition for rental properties.
The research also revealed that there’s currently a substantial gap between what renters expect and what they feel they receive when it comes to the lettings process, particularly around fairness at the end of a tenancy, transparency surrounding fees and agent’s professionalism.
The landlord outlook
The National Landlords Association (NLA) have said that 20 per cent of its members intend to sell at least some of their properties this year, with one in five planning to reduce the number of properties they rent out. This is blamed on the Government’s tax changes, introduced to cool activity in the buy-to-let sector.
The NLA has warned that it is likely to lead to higher rents and fewer properties for tenants to choose from. They have predicted that the combination of landlords leaving the market and the increased demand for let properties from those unable to get onto the property ladder could force rents up by an average of three per cent a year between now and 2022.
Much like with renters’ expectations, there are also notable gaps between what landlords want and what they feel is delivered by agents, highlighted within the State of the Property Nation Research. The biggest gaps are around the transparency of fees and the lettings process, good rental valuations and the ability to deal with maintenance issues.
How lettings agents can thrive in 2018
With so much change in the rental market, agents need to be prepared and open to new opportunities. An increase in demand for rental properties may be good for business but tenant expectations are rising, if your agency can cultivate a reputation for best practice and high customer service standards then you will attract more landlords and tenants.
One way of doing this is to utilise property technology to provide a better service experience. PropertyFile, a tool built by ZPG, enables you to provide an online 24/7 solution for tenants, landlords, vendors and buyers. It improves efficiency by offering an online portal for tenants and landlords to self-serve, giving tenants the ability to log maintenance issues and track the progression of them, whilst landlords can stay up to date with their rental portfolio. Saving time for agents and offering greater transparency throughout the entire lettings cycle for consumers.