Klippa Relocation understands the importance of keeping HR and global mobility teams informed and updated about the latest trends and developments in the rental market. Through robust data analysis and market evaluation, critical insights can significantly impact the decision-making process. Let’s dive into the intricate details of recent market shifts and legislative changes to better shape the relocation journey.
Rental Market Overview
Although the number of new tenant enquiries through 2023 decreased by 22% (according to data from Savills), the rental market has remained very active. Furthermore, despite the lower volume, the average budget per enquiry increased by 15%, indicating not only higher rental prices but also increased demand for quality.
Prime Rental Market Trends
- Smaller, lower-value properties are most popular.
- There is a general lack of available housing stock nationally.
- The demand is decreasing for larger, higher-value properties.
- The condition of the property is becoming increasingly important.
- Properties in better condition attract higher prices.
- Savills notes that almost half of its agents report that landlords are expecting rent increases.
A Closer Look at Prime Rental Market Statistics
With a more detailed examination of the data, the following demonstrates rental market trends:
- Quarterly growth (transactions) in Q4 2023: +4.4%
- Annual growth (transactions) in Q4 2023: +17.4%
- Overall growth (transactions) since March 2020: -0.1%
- Smaller and lower-value properties have become increasingly popular. Due to the notable lack of available housing stock, this trend is driving prospective tenants towards more affordable and compact living spaces.
- Conversely, there is a discernible decline in the demand for larger, higher-value properties. Factors influencing this shift may include evolving lifestyle preferences, economic considerations, and changing trends in housing choices. As a result, the market dynamics favour smaller properties, reflecting the shifting demands of renters.
- A significant factor in the evolving real estate scenario is the growing importance placed on the condition of the property. Well-maintained properties are proving to be more appealing to renters, often commanding higher rental prices. This underscores a change in tenant priorities, where the overall state of a property plays a key role in decision-making processes.
- Insights from Savills agents in the UK provide additional context for the market dynamics. Nearly half of these agents report that landlords are anticipating rent increases. This implies a broader economic or market-driven trend, influenced by factors such as inflation, supply-demand dynamics, changing legislation, or other external forces impacting the rental market in the UK.
An Overview of Legislation Updates
Cost of Living (Tenant Protection) (Scotland) Act
This legislation is an important development in tenant protection. The Act imposes a strict ban on evictions, aiming to provide enhanced security for tenants and maintain stability in the housing market. It further introduces a cap on rent increases, ensuring that rentals remain within affordable boundaries for tenants. This legislation emphasises the commitment to fairness and affordability in the housing market, which are critical considerations for those considering relocating to Scotland.
AML (Anti-Money Laundering)
AML requirements for letting agents involve a range of measures, from compliance to customer due diligence, risk assessment, verification of source of funds, and awareness of red flags. It is crucial for agents to ensure that all transacting parties are correctly identified and their sources of funds confirmed. In a nutshell:
- Customer Due Diligence (CDD): CDD is mandatory for both tenants and landlords involved in agency agreements with a monthly rent of 10,000 euros or more, requiring identity verification and understanding the nature of the business relationship.
- Risk Assessment: Agents must identify and assess the risks of money laundering and terrorist financing, maintain a written risk assessment, and appoint a Money Laundering Reporting Officer (MLRO) for compliance.
- Source of Funds Verification: Letting agents are required to verify the source of funds used in transactions, with the level of documentation depending on the assessed risk level.
Right to Rent
Under UK law, landlords and agents have a legal obligation to verify the immigration status of prospective tenants before signing a rental agreement. This process, known as a ‘Right to Rent’ check, is aimed at ensuring that the tenant has a legal right to reside in the UK. In a nutshell:
- Landlords and agents must conduct right-to-rent checks on prospective tenants before entering into a tenancy agreement.
- Prospective tenants can obtain a share code online to prove their right to rent if they are not British or Irish citizens.
- British or Irish citizens can prove their right to rent in England by showing specific documents or obtaining a share code.
- Landlords and agents should retain evidence of the right to rent check for the duration of the tenancy agreement.
- The right to rent applies to residential tenancy agreements first entered into on or after specific dates in different regions of England.
- Landlords and agents must not accept scanned copies of documents and cannot check documents over video calls.
National Trading Standards Estate and Letting Agency Team (NTSELAT)
As the umbrella organisation overseeing estate and letting agencies, NTSELAT outlines specific guidelines that property agencies must adhere to. Sanctions can be imposed for non-compliance, making it essential for agencies to ensure their operations remain within the provisions of NTSELAT’s rules. This ensures ethical practices and high standards within the property sector, contributing to a more transparent, fair and professional industry. In a nutshell:
Part A: Basic Material Information
Part A of the NTSELAT guidelines pertains to information that is always considered material for all properties, regardless of location. This information generally involves unavoidable costs that will be incurred by the occupier. It includes:
- Council tax band or rate
- Rent amount
- Deposit amount
- EPCs
- Any specific arrangements for the tenancy
Part B: Property-Specific Material Information
Part B of the guidelines focuses on information that must be established for all properties. It mainly applies to utilities and similar features where non-standard aspects would affect someone’s decision to look any further at the property. This includes:
- Physical characteristics of the property, such as property type and construction
- Number and types of rooms, including room measurements
- Utilities, including how they are supplied
- Parking information
Part C: Additional Material Information
Part C refers to additional material information that may or may not need to be established, depending on whether the property is affected or impacted by the information. This applies to properties affected by the issue itself because of, for example, the location of the property. Part C material information includes:
- Building safety issues, such as unsafe cladding, asbestos, risk of collapse
- Restrictions, such as conservation area, listed building status, tree preservation order
- Planning permission for the property itself and its immediate locality
- Accessibility/adaptations, such as step-free access, wet room, essential living accommodation at entrance level
- Whether the property is in a coalfield or mining area
- Risk from floods or coastal erosion
Renters Reform Bill
The bill aims to abolish no-fault evictions (Section 21) and potentially introduce a new tenancy agreement called ‘Lifetime Deposit,’ which moves with the tenant from property to property, reducing financial pressures at the start of each new tenancy. It aims to create a more balanced and fair relationship between tenants and landlords. Abolishing Section 21 would allow tenants to remain in properties as long as they are not in breach of their agreement.
Energy Performance Certificates (EPC) Proposals
In an effort to promote sustainability, the UK government has proposed improving the energy efficiency standards for rental properties. The proposal stipulates that by 2026, all newly rented properties must meet a minimum EPC rating of ‘C’. The standard is set to extend to all existing tenancies by 2028, signifying the commitment to greater environmental responsibility within the housing sector.
Final Thoughts
HR and global mobility teams can use these insights to make more informed decisions and better prepare for the complexities of the letting market for relocating employees. As dedicated partners, Klippa Relocation remains committed to keeping you informed, empowered, and ready to tackle the relocation journey.
Speak to one of our experts or send a message today and find out how we can add value to your relocation programme.
