Renters Reform Bill causing unease amongst investors - agency

The Jackson-Stops agency is warning that the Renters Reform Bill is driving investors away - and making the market worse, not better.

The verdict comes from Jackson-Stops in its forecast of the lettings and sales sectors in 2024.

Country Lettings Market - Across Jackson-Stops’ network rents are predicted to rise the most at the lower end of the scale (less than £1,500 pcm) because there has been the lowest level of price rises within this section of the market to date. At the mid and higher ends of the country lettings market price rises are likely to be more subdued, owing in part due to the level of increases that has already been seen by the market following the pandemic to date.

Rental policy has also been a political staple in 2023 with the Renters Reform Bill, with the impact of this policy change on new rental properties entering the market and improvements being made to current properties not yet known by the market.

 “In 2024, I foresee a price increase for properties below £1,500 per month, hitting the affordability ceiling for those on average salaries. However, between £1,500 and £4,500 pcm, rents may soften due to previous escalations in the last 24 months. Above the £5,000 pcm mark, rents are expected to remain fairly flat” explains Will Jordan, lettings director of Jackson-Stops Cheshire branch. 

He continues: “Renters naturally have a specific checklist they adhere to, which predictably includes proximity to work or good transport links, a minimum number of bedrooms, and more specific features such as off-street parking or pet policies. While energy efficiency is gaining attention, it hasn't become a deal-breaker for most renters, with flexibility remaining the overwhelming ask if other key features are met, even for properties with a lower EPC rating.

“Looking ahead to 2024, several factors are likely to shape the market. The proposed Renters Reform Bill, along with sustained high interest rates and elevated inflation rates, amidst an upcoming general election, are causing uneasiness among investors. This reticence might hinder the pace of new rental properties entering the market, leading to a scarcity of 'affordable' rental accommodations. Consequently, the residential property market overall may experience a slowdown, affecting both first-time buyers and tenants seeking new homes. We expect 2024 to be a subdued year across various segments of the rental market.”

London Lettings Market - The agency anticipates a ‘full throttle’ start to 2024, with January being an especially busy time for lettings thanks to empty nesters deciding to downsize, couples coming together and new employees relocating. 

Alex McConnell, lettings director of Jackson-Stops Pimlico branch in London comments:  “While supply and demand are currently quite evenly matched, I suspect this may change. January and February are often two of the best months of the year to list a property with demand surging post-Christmas. In the peak months of 2023, we were receiving between two and five offers on listings, resulting in a ‘best bid’ scenario where properties were often rented over the asking price. 

“With increased rents we’ve noticed the condition of properties, in terms of refurbishment and redecoration, is increasingly important to tenants. Tenants have higher expectations of landlords and if they are paying a premium price then the property condition should reflect this. Long-term tenancies continue to be a preference, with average fixed term contracts of 27 months, in light of slimmer stock levels for much of the year, both landlords and tenants are opting for the security and a healthy return on investment.”

On the sales side, the agency wants that local areas could see price dips of as much as 5.0 per cent, but more nation-wide trends for 2024 include greater interest in existing owners unlocking equity in their properties, and thus downsizing. On the negative side there is likely to be a lengthening of the typical transaction time with the current time taken between sale agreement and exchange of contracts averaging 12 weeks in some markets. This has been in part because of the time taken to process mortgages currently, as well as the cross county variations in acquiring searches and solicitors and licenced conveyancers sourcing answers to queries ahead of completion. 

 The agency’s chairman - Nick Leeming - says: “Another unpredictable year for the property market has passed, proving that the only thing that is certain is uncertainty. Despite a challenging economic backdrop with mortgage rates impacting buyers’ and sellers’ plans which has prompted some to take a ‘wait and see’ approach, the property market continues to show signs of enduring strength. We expect a minor reduction in property values at worst, under 5% over the year, which will bring some house prices back in line with pre-pandemic levels.

“Transaction speeds have slowed significantly. All the skills that we employ to progress sales are having less impact than in previous years. Surveys are being treated warily by buyers – all the characteristics of a stickier market. But with the prospect of interest rates going down next year and a greater pipeline of supply which is likely to increase further in Spring 2024, there are reasons to expect a better market emerging as the year progresses. It is important that sellers continue to accept realistic valuations, reflecting a market that has greater competition once again.

“The possibility of a General Election in 2024, as early as May 2024, could cause buyers to pause and hold off making a long-term commitment until they know the impact and the chance of changes to housing policy. Though the reality of the housing market is that while those not pressed to move can delay a purchase, a change in lifestyle or circumstance ensures that a steady stream of transactions will take place throughout 2024, to levels seen in pre-2020."