Rents for new lets rose steadily throughout 2022 with Zoopla revealing that there had been a 12.3% year-on-year rise for new lets in October. It was not all good news for landlords though with inflation hitting a 40-year high and the increases in the Bank of England’s base rate causing mortgage rates to rise to their highest since 2008.
As the New Year begins many landlords will be asking what does 2023 have in store for them and will it be a good year to buy and let?
High interest rates and the cost of living crisis are likely to make it harder for many first-time buyers to get onto the property market keeping many in the rental trap. This is likely to help keep rental demand high. However, with wages failing to keep pace with inflation it is unlikely that rents will continue rising at the same rate as they did in 2022. The current market forecast is that average rental growth across the UK during 2023 will be between 4-6.5% with around 16-20% cumulative growth in the next five years.
The UK economy is currently in a recession and a poll of purchasing managers by S&P Global in November suggested that the economy is shrinking at a quarterly rate of 0.4%. This will naturally have an effect on the capital value of rental properties. However, landlords should take some reassurance from the fact that while Capital Economics is predicting that they will fall by up to 15% by mid-2024, it is still expected that they will be significantly higher than they currently are in five years' time. This means that landlords who are playing the long game will stand to gain in the long run.
So what does that mean if you are considering purchasing a buy-to-let in 2023? In the current economic climate buy-to-let landlords should be considering long-term gains as the goal instead of focusing on short-term profits. Falling property prices give landlords the opportunity to add to their portfolios at a time when the market is down and then to reap the rewards when it recovers. With the help of an experienced letting agent this market provides many opportunities for first-time landlords and portfolio landlords alike.
If you are considering selling your rental property in the next couple of years then you would definitely benefit from selling as soon as possible as property prices are not expected to recover in the short term. If you are undecided then a chat with an experienced letting agent may help you to decide as they can advise you on things that you can do that will help you to make your property more profitable meaning you may be able to ride out the recession without having to sell your rental property.
If you are considering purchasing a rental property in Preston, Leyland, Chorley or the surrounding areas in 2023 and would like to discuss how we can help you to manage it or would like some advice on how to manage your current rental property please give us a call on 01772 284606.