Our property market predictions for 2023

Our property market predictions for 2023

After the economic turbulence of 2022, buy to let landlords and investors are understandably cautious. We looks at what's in store for the rental market in 2023.

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Between skyrocketing mortgage rates and forecast house price dips for some parts of the UK, buy to let landlords are naturally anxious. But, with every challenge there is opportunity. Here are our top five predictions for 2023:

1. High rental demand will continue

There has been a 40% decrease in rental listings year on year, while the number of people looking to rent is 142% higher than five years ago. Rising taxes and increasing property regulations have led to more buy-to-let landlords leaving the market. 

With this disparity between supply and demand set to continue, competition for rental units is likely to remain high. These figures should provide some reassurance to landlords questioning whether they should stick or sell. There is a reliable pool of renters, particularly in commuter towns, willing to pay for a quality home. At Smarter Rent, we are experiencing occupancy rates of 95%+, with some properties hitting 100%, and don’t see any signs of this slowing down.

2. Tenants will renew their tenancies

Along with high demand, renters are also expected to renew tenancies, providing further security to landlords. Renters now stay in their property for an average of 4.3 years, increasing to 17.5 for the over 75s. Predicted rent rises of 4% in January 2023 and a lack of supply will likely mean renters stay put for at least 12 months. 

Equally, there has been significant demand for Airbnb style lets, rising 600% in some areas from 2015 to 2021, giving landlords greater flexibility in how they earn an income from their property.

3. Landlords who put renters first will reap greater returns 

With rising mortgage rates, possible rent freezes and EPC changes on their way, it’s forecast that one in five buy-to-let landlords will leave the market. This creates an opportunity for those who are willing to invest in their property. 

At Smarter Rent we take a renter first approach. Most landlords replace a carpet and add a fresh lick of paint, but this alone doesn’t maximise returns. Instead, we look at each house individually, determine the type of renter who’d stay there and kit the property out accordingly. We have a concierge team on 24/7/365 should issues occur. Renters are willing to pay for this level of comfort and service and the upfront cost is quickly earned back. Our owners typically get 30-50% more in their pockets versus traditional agents.

4. Demand for rental accommodation in commuter areas will continue

While the pandemic and shift to home and hybrid working has led to many prioritising square footage and green space, this pattern of moving from the city to commuter towns has been present for many years. Providing good schools, travel connections, plenty of space and a sense of community, the home counties continue to attract families and those wanting to escape the hustle and bustle of the city. In fact, house prices in the home counties have risen at a higher rate than London since 2010.

5. Property will continue to be a safe home for money

The predicted dip in prices will give investors, particularly those with cash, opportunities to secure property with less competition. Over 50% of investors plan to invest in 2023 and Smarter Rent is already securing properties at 15% below market value. For those who already own a property, Savills have forecast a 12% compound growth over the next five years, indicating that property remains a stable investment and reliable asset class. 

It’s also worth being wary of media hype. Headline grabbing claims of a market correction are incredibly broad. Looking at 2008 data, properties were affected based on type and location with some smaller areas escaping the impact of the crash. This is particularly true for areas out of cities. Their rural charm combined with a lack of development space means they continue to demand an average premium of 13% compared with neighbouring towns. 

What should I do?

Whether you’re a homeowner with a property you’re looking to rent out, or an investor wondering when and where to invest, chat to us today - hello@smarterrent.co

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