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What Will 2024 Bring for Landlords?

Feb 6, 2024

Turning the Page on 2023 

As 2023 draws to a close, it’s time to look ahead at what 2024 has in store for us. 

Whether 2023 has been your hardest or most successful year to date, turning the page and starting a new year can feel like a welcome fresh start.

2023 has felt like a mixed bag for many in the private rental sector. While an unstable economy has put a lot of financial strain on landlords, the rental market has been buoyant, offering plenty of opportunities for those willing to take them. 

Despite economic challenges, there’s still plenty of good news for landlords when we look ahead. The rental market is set to continue thriving throughout 2024, and house prices are dropping, which could provide excellent opportunities for landlords who want to expand their property portfolios. 

2024 will also be a pivotal year for legislative changes in the rental sector. The long-awaited Renters Reform Bill should come into effect towards the end of the year, and landlords will need to plan and prepare for it accordingly.  

Here at Landlord Vision, we’ve been busy peering into our crystal ball and are now ready to reveal what 2024 holds for landlords. In this article, we’ll explain the key economic and legal changes coming to the rental sector in 2024, helping you plan and prepare effectively for the year ahead. 

2024 Financial Outlook for Landlords 

Landlords will face a complex financial landscape in 2024. In this section, we’ll explore how the economy is expected to change during 2024 and how these changes could impact landlords and the wider rental market. 

Inflation, Interest, and Mortgage Rates 

The Bank of England has raised interest rates throughout 2023 due to soaring inflation. Raising interest rates encourages people to spend less and save more. Then, less demand for goods should, in theory, cause prices to fall. The Bank hopes that keeping interest rates high will avoid a wage-price spiral – a situation where workers demand higher wages to keep up with the cost of living, which drives up business costs and prices. This scenario can keep inflation higher for longer. 

An article on The Guardian website suggests that interest rates will remain high as we enter 2024, with the UK struggling with weak economic growth and persistent inflation. Most experts think interest rates have peaked at 5.25%, but the IMF has warned central banks against cutting interest rates too quickly. However, it is unsustainable to keep rates as high as they are now, so as soon as inflation rates are back under control, the Bank should reduce interest rates, and interest rates are falling faster than expected. According to The Times, the annual inflation rate was 11.1% a year ago, which has now fallen to 4.5%. The Bank of England expects inflation to keep falling throughout 2024, but its governor has said he can’t see rates falling dramatically any time soon as inflation isn’t predicted to reach the Bank’s target until the end of 2025. However, the same article in The Times says that analysts anticipate that the Bank of England could start cutting interest rates as soon as June 2024. 

Mortgage rates are expected to fall back to 4.5% by the end of 2024, according to Zoopla. This could ease some financial pressure on landlords and improve housing affordability, potentially affecting the rental market dynamics. 

House Prices 

In 2023, the housing market experienced its first real downturn in over a decade. This downturn was primarily driven by the cost-of-living crisis and a hike in mortgage rates, making property unaffordable for many. With mortgage rates rising from just 2% to 6%, there was very little incentive to buy in 2023, with many potential buyers putting it off for at least six months when property prices and mortgage rates may be lower. 

Zoopla predicts that UK house prices will fall by a further 2% in 2024, a more optimistic figure than some. This estimate is based on the assumption that mortgage rates will drop in 2024, encouraging more people to enter the market later in the year. House prices are not expected to start rising again until 2025.  

Rent 

Demand has consistently outstripped supply in the rental market for the last few years. This shortage of rental properties has been caused by a perfect storm of factors, including a lack of new rental stock and landlords leaving the market due to challenging conditions. Property consultancy company JLL recently reported that it anticipates that the lack of new rental stock and a challenging interest rate environment will lead to rental growth exceeding wage growth in 2024. However, news from the Autumn budget may alleviate some pressure from the rental sector. During the Autumn 2023 budget statement, the Chancellor committed to investing £110 million in nutrient mitigation schemes to facilitate the building of new homes in 2024. 

As for the unprecedented demand for rental property, there’s no sign of it easing any time soon. High mortgage rates and the cost-of-living crisis have made buying unaffordable for many. According to Zoopla, as of November 2023, demand for rental properties is running 27% above the five-year average. This has led to a substantial increase in the price of rent. In fact, in November 2023, rents rose 10% for the 20th month in a row, and the average rent for a new lease stood at £1,166 per month. Looking ahead to 2024, Zoopla predicts national rental growth to grow by 5-6% and even higher in big cities. Rental demand isn’t expected to slow until at least 2025, when more attractive mortgage rates may prompt more tenants to transition into homeownership. 

What Could This Mean for Landlords? 

  • Mortgage costs – Landlords with variable-rate or tracker mortgages will face high costs due to high interest rates, which could impact the profitability of their investment. 
  • Rental demand – High mortgage rates may deter potential homebuyers and continue to increase the demand for rental properties, potentially driving up the price of rent further. 
  • Property values – High interest rates can cool the housing market, potentially lowering property values. 
  • Relief in late 2024 – Predictions of interest rate cuts by mid-2024 and a fall in mortgage rates to 4.5% by the end of 2024 could mean that landlords experience some relief from financial pressures during the second half of 2024. 
  • Investment opportunities – Lower property prices could present good opportunities for new landlords or those looking to expand their portfolios. 
  • Market uncertainty – The uncertain property market requires landlords to be cautious with investments and mindful of potential further changes in house prices and mortgage rates. 

2024 Legislation Changes for Landlords 

In 2024, we expect to see some significant legislative changes come into effect, primarily the introduction of the Renters Reform Bill. Landlords must plan and prepare for these changes to ensure a smooth transition to the updated regulations and standards. 

Renters Reform Bill 

The Renters Reform Bill has been a popular subject of debate amongst landlords during 2023. The bill aims to provide tenants and landlords with a safer and more secure private rental landscape. Although we have no official date for when the bill is due to come into effect yet, it went through the committee stage of its journey through parliament in November 2023, so we’re probably looking at late 2024; some people are guessing around the start of October. 

During the committee stage, one important part of the Renters Reform Bill, abolishing Section 21 evictions, was delayed indefinitely. It is to be delayed until it is judged that sufficient progress has been made in improving the court process to make it simpler for landlords to use. 

When the Renters Reform Bill does come into effect, it will initially affect new tenancies only, with pre-existing tenancies to be included 12 months later. 

Let’s take a look at the key points covered by the Renters Reform Bill: 

  • Ban on fixed-term tenancies – A fixed-term tenancy is an agreement to rent a property for a fixed period at a fixed monthly cost. These will be banned under the Renters Reform Bill. These will be replaced by rolling tenancies that can be terminated by the tenant by giving the landlord two months’ notice or by the landlord evicting the tenant under valid grounds for repossession. 
  • Crackdown on rent increases – Landlords will only be able to increase rent once per year and must give tenants two months’ notice of the increase. 
  • Private rented sector ombudsman – A new ombudsmen service providing independent, impartial advice to help resolve issues between landlords and tenants is also set to be introduced. If tenants feel their complaint hasn’t been adequately addressed, they will be able to go to the ombudsman, potentially resulting in landlords being ordered to pay compensation of up to £25,000. Landlords will be required to pay to register with the ombudsman. 
  • Decent Homes Standard – This set of standards currently dictates the living standards for social housing. The Renters Reform Bill plans to enforce the same rules for private landlords to improve the quality of living conditions across the rental sector. 

New EPC Regulations Scrapped 

In another recent development, landlords will no longer need to rush to improve the energy efficiency of their property during 2024. Landlords were previously under pressure to upgrade their properties to a minimum EPC rating of C by 2025 for new tenancies. However, Rishi Sunak scrapped the plans in a speech in September 2023 when he said, “Under current plans, some property owners would have been forced to make expensive upgrades in just two years. That’s just wrong. So those plans will be scrapped, and while we will continue to subsidise energy efficiency, we’ll never force any household to do it.” This change provides landlords greater flexibility and more time to make the changes. 

What Could This Mean for Landlords? 

  • Future planning challenges – The shift to rolling contracts may make it more difficult for landlords to plan for the future, as landlords will have less predictability regarding when tenants may vacate the property. 
  • Complications for student lets – The move to rolling contracts could be particularly problematic for student lets, potentially leading to longer void periods if students leave mid-year. Landlords are seeking amendments to the bill and hope to have it modified to allow for student lettings. 
  • Enhanced accountability – Introducing the ombudsman scheme and the Decent Homes Standard will force landlords to be more accountable for tenant complaints and ensure high living standards in rental properties. 
  • Financial risks – Restricting landlords to a single yearly rent increase could mean landlords face financial challenges if their expenses rise and they have already made their annual rent adjustment. 

In 2024, the UK will embark on a journey towards economic recovery. Landlords who continue to weather the storm may be rewarded towards the end of 2024 when mortgage rates are expected to fall. Landlords will also continue to reap the rewards of a strong rental market, particularly those with investment properties in high-demand cities. Strong demand and high rents are likely to yield profitable returns for many, even in the face of high mortgage rates. The much-anticipated Renters Reform Bill will bring significant legislative changes aiming to improve the private rental landscape for landlords and tenants. We are optimistic that by the close of 2024, the UK economy should have turned a corner, and some of the current financial challenges landlords face should begin to ease. 

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