Bruce Evans, Managing Director, Group Operations at Stirling Ackroyd, gives his views on the current Lettings Market.
The two biggest influences throughout 2022 in Lettings were the shortage of available rental properties in the markets we trade in and the increases in rent levels.
From January all the way through to November there were less properties on the market versus the same period the previous year. At some points the available properties were at the lowest levels I have seen in my many years involved with lettings. Since then there has been a slight increase year on year. But overall properties available for let were down year on year and versus historic levels.
Average rents on New Lets achieved across the year increased by £158 per month or £1,896 per year. We don’t see this significantly changing in the coming months, although we understand many of our historic Landlords are still trying to cash out and their properties remain on our Sales register. We have seen some of these return to us in lettings over the last few months and we fully expect to see that trend continue. Had it not been for so many new Tenants in a certain address in Downing Street last year, I am sure the current dynamics in the overall housing market would have been different! So political opinion to one side, some stable tenants in No. 10 will be a good thing for the housing market. As a business we have seen more Landlords and Tenants renewing their tenancy last year. You may recall last year I explained the reasons why renewal rents were still not at the level of new rents, this gap continues to diminish as we keep going through the renewals cycle, we are sure to see this trend continue over the next 12- 24 months, where, accounting for no further pandemics, should return to relative parity between renewal rent reviews (5.63% up) and new lets (8.00% up).
What I have found very interesting in the last year, is tenants whose tenancies have been up for rent reviews and live in one of our Managed properties are prepared to pay 1.45% more rent than those who live in our Non Managed properties. Those of us in the lettings industry who have dedicated ourselves to providing a good service are not surprised by this. Add to this, the work we have done at Stirling Ackroyd over the last 24 months in strengthening our teams and investing in technology for our customer and support teams. It is pleasing to see we are now adding real financial value to our clients. While 1.45% may not seem like a big number in pound notes, it is on average £344 of additional rental income per tenancy per year.
Looking forward, it is always hard to see much beyond what we are currently experiencing in the market changing significantly or quickly. There will however be some changes I expect to see. Available properties year on year will be slightly ahead for us. We are seeing savvy institutional and corporate investors including house builders bringing new developments onto the lettings market. These properties will be energy efficient and will attract good quality tenants increasing their expectations of what they can expect from a home. With Energy Performance (EPC) improvements on the Government’s lettings agenda, now is the time to start talking to your property manager and making sure you align your investments to attract strong rent levels going forward. I would liken this change to that of the student market over the last 15 years. No longer will students accept poor quality properties. I am sure many of us remember the days of student houses in run down areas with woodchip wallpaper, thread bare carpets, electric fires and avocado bathroom suites. Nowadays students rightly expect all the modern conveniences in great locations and top quality fit outs, along with high speed broadband of course. The same will be expected in energy efficiency terms but in a much shorter space of time. The rental market will move faster on this than your own homes in most cases.
The other changes we are expecting will also come from the Government proposed changes. Nothing is final yet and we will keep you updated as always, but rest assured we are well prepared.
At Stirling Ackroyd, we know all the work we do to make sure our Managed Landlords are compliant and up to date. We enjoy the challenges and appreciate that you trust us with your property. We are not yet claiming to be perfect, but having recently been voted both London and the UK’ s best agency, we believe we are on the right track and the best company to work with.
Sharing one final fact with you before I sign off. We have ended the year with more Managed Landlords than we entered the year with (this is before and excludes any acquisitions we have also added to the group). It fills me with great pride that more Landlords are choosing to work with our teams here at Stirling Ackroyd who we value, in a market where less properties are available and the complexity of being a Managing agent is ever increasing.
Together I hope we continue to enjoy a successful working relationship throughout 2023 and hope you all personally have a very Happy New Year.
Bruce Evans, Managing Director, Group Operations at Stirling Ackroyd.