The 2020 rental market: what to expect

As 2019 draws to a close, we look ahead to the next 12 months in the private rental sector. While Brexit remains a concern, albeit on the back burner, it is the general election and the full effects of a number of new lettings laws that will shape 2020. Here are Klippa Relocation’s predictions.

Rents will keep rising

A number of long-term rental forecasts can now be assessed for accuracy. In 2013, the National Housing Federation said rents would be 46% higher in 2020 but this hasn’t happened. In fact, data from Statista shows England’s average weekly rent in 2013/2014 was £176 and it stands at approximately £241 per week in 2019. Modest rises are also reflected in the latest figures from HomeLet, which reveal the average rent across the UK has risen by 2.7% in the last 12 months.

New forecasts predict rent rises to continue. Savills suggests rental price growth in London will rise ahead of wage inflation at 18.8% over the next five years, with rental growth across the rest of the UK expected to average at 13.1%. 

Until we know the result of the general election and the property intentions of who comes to power, the future of rental values looks unstable. There is the possibility of a rent cap or the scrapping of second home stamp duty – depending who is voted in – both of which would affect the private rental market in drastically different ways.

Rental properties may be harder to come by….

Private landlords are selling up in their thousands, with Savills estimating that by June 2019, 120,000 buy-to-let properties had already been sold by landlords. The exodus may be more pronounced over the next 12 months as punitive changes to tax relief on mortgage interest reach their phased conclusion in April 2020. At this point, landlords will be unable to deduct any of their mortgage expenses from rental income to reduce their tax bill, potentially prompting another raft of property investors to sell up and exit buy-to-let.

…and they will be marketed by a smaller number of letting agents

The watch word in 2020 will be consolidation. Many estate and letting agents will find it harder to survive, thanks to a contracting sales market and the realisation that the tenant fee ban is hitting agents’ bottom line figures harder than expected. Official Government company insolvency data showed 371 estate agency business entered informal insolvency proceedings in the first nine months of 2019 and it’s a trend that may continue. Expect buyouts, mergers and closures, with fewer agency names on the High Street.

What private rental properties remain will be eco friendly

From April 1st 2020, all private rental properties will need an Energy Performance Certificate (EPC) showing at least an E grade. Previously, this energy legislation only applied to new-to-market and renewing tenancies but as of next year, all privately rented properties need to meet this standard – even if the property is in the midst of a tenancy with tenants in situ. 

Landlords will be expected to make changes – such as improving insulation, fitting more efficient boilers and changing some fixtures to eco-friendly alternatives – to ensure their properties are legally compliant. The new EPC rule may also affect the supply of rental properties as it will become unlawful for any letting agent to take on or market a let property that doesn’t meet the E grade – the byproduct of this could be a number of lets being withdrawn from the market. 

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