To put it simply – letting agents are our business. When they overwhelmingly voice a concern about something, we take that very seriously.
For our 2024 annual Rental Confidence Index, we surveyed property professionals about their primary concerns, and the answer was unexpected but not entirely surprising. Even more concerning than the looming election, finding new landlords was cited by 64.5% of respondents as their biggest worry – an increase of almost 20% over 2022.
Portfolio growth remains their second biggest concern, followed by compliance with new regulations jumping into third place – probably in expectation of the Renters (Reform) Bill. Despite the bill’s premature end, expect to see measures contained within the bill to pop up in election manifestos soon.
But it is the lack of landlords – and consequently properties to rent – which creates the biggest headache, a trend that could continue if more landlords decide to cut back on their portfolios. A flurry of renter-friendly policies are likely to feature in upcoming election campaigns which will do little to reassure landlords, and could result in an even greater squeeze in the supply of properties in the Private Rented Sector.
More than half of the respondents to our survey reported that landlords were selling properties in 2023 (54.5%) – up 5.5% on 2022’s result – while only 4.1% said their landlords were looking to expand.
Eviction and affordability pressures
Interestingly, not many respondents expressed concern about tenant competition for properties. This could be because high levels of competition don’t just increase rents, but also agency commission income. However, the increase in rents will have had an obvious impact on affordability.
Perhaps unsurprisingly, with the rising number of Section 21 evictions by bailiffs, we have seen agencies using guaranteed rent offers as a way to attract new landlords and protect existing clients from tenants who cannot or will not pay the rent.
For survey respondents in Greater London, the percentage using guaranteed rents rose to 50% – this makes sense as affordability is at its worst in London. Recent data from the Office for National Statistics shows that the average renter in the capital spends 35% of their income on rent, compared to a national average of 26%.
If new legislation from either a future Labour or Conservative government makes it harder to evict tenants, this could encourage even more landlords to protect themselves financially by seeking out guaranteed rents. Conversely it might also discourage agencies from offering guarantees because they could be responsible for paying rents even if tenants don’t.
Despite the high energy prices last year, most survey participants (61.9%) reported no difference in the number of tenants enquiring about properties with higher energy efficiency (potentially cutting tenants’ energy bills). Perhaps this was down to the restricted supply of tenancies, forcing more applicants to accept whatever was available.
Cost pressures
Top among respondents’ profitability strategies for 2024 was increasing the number of managed rentals (74.8%), followed by offering extra services and products (14.3%) and reducing office space (6.7%).
And almost a third (29.2%) had thought about selling their agency – 9% more than in the previous year. But this was dwarfed by the number of agents who had considered acquiring other agencies in order to achieve growth (51%).
When it came to landlord property sales in 2023, property professionals reported that less than 10% were being sold to other landlords who planned to retain the property as a single-family home. Over 60% reported that the homes were being sold to first-time buyers who were either tenants or still living at home.
The cost pressures on landlords had a knock-on effect on agencies, resulting in a 13.9% increase in the number of agents lowering commission in a bid to retain clients (32.2%).
In any case, prevailing commissions appear to be well-justified, as only 13.8% felt landlords had a good understanding of all relevant compliance issues faced when renting a property.
And with further legislation on the way in Scotland and Wales, and a general election sure to bring new policies in England, there has never been a better time for landlords to engage a professional agent, because the financial penalties for non-compliance can be hefty.
Our full survey report can be read here.
