After a year dominated by rising costs and uncertainty around future legislation, what can buy-to-let landlords expect from 2024?
Read on for five rental market predictions from the Quealy & Co Lettings Team, covering the following topics:
- Rental reforms
- Landlords’ selling plans
- The impact of the general election
- Average rent rises
- The future of energy efficiency
1. Rental reforms could edge closer to becoming law
After several years of waiting, one of the biggest buy-to-let events of 2023 was the launch of the Renters’ Reform Bill in May 2023.
The bill, which covers the rental market in England, set out its plans to ban Section 21 evictions, make it easier for tenants to request to keep pets, and end fixed-term tenancies.
Since then, the bill has passed a first and second reading, as well as a committee stage. Ahead of the committee stage, the government announced a significant U-turn: Section 21 evictions won’t be abolished until the justice system is reformed.
During 2024, the proposed reforms could edge closer to becoming law. Before this happens, they’ll need to complete a report stage and third reading in the House of Commons and then pass through the House of Lords.
Considering this, it’s unlikely any laws will be implemented until late 2024 or early 2025. Another consideration is the upcoming general election, which could cause further delays and uncertainty.
Over the coming months, more details around how the government plans to reform the court system to end Section 21 evictions could be published. You can see the latest version of the bill here, which includes the amendments that were passed at the committee stage.
2. Landlords will continue to sell due to challenging conditions
Rising costs, limited tax relief, and changing legislation – there are many reasons why landlords may consider selling a property in the coming months.
As part of our 2023 Landlord Report, a quarter (25 per cent) of landlords told us they were planning to sell a property before August 2024.
Another study by the Open Property Group found that a third of landlords are considering retiring or leaving the market due to issues with legislation and rising costs.
With the 2024 market landscape likely to remain similar to the previous year, it wouldn’t be surprising to see landlords continuing to consider their options.
One factor that may convince some landlords to stick it out is a further reduction of the capital gains tax allowance in April 2024, when it drops from £6,000 to £3,000.
As recently as March 2023, the CGT allowance was as high as £12,000. These changes have significantly increased tax bills for many landlords who have decided to sell in recent times.
Are there still reasons to buy rental property?
Just three per cent of landlords are planning to buy a property in 2024, according to our research.
However, high demand for rental property means buying could still be a good option for some investors.
A study by the National Residential Landlords Association found that rental demand in the third quarter of 2023 was three times as high as it was in Q3 2019 before the Covid-19 pandemic.
On top of this, despite some falls this year, average house prices are expected to rise again in the medium and long term.
3. General election will shape the future of the rental market
The next general election – which must take place before the end of January 2025 – is likely to have a significant impact on the rental market. This is because politicians will be keen to get the votes of the nation's huge number of landlords and tenants.
There’s a range of issues affecting the rental market. Attempting to solve them could form an influential part of the leading parties’ manifestos.
For example, we know that 66 per cent of landlords view confusing and constantly changing government legislation as one of their greatest challenges. At the same time, many tenants are dealing with spiralling costs, with research from think tank New Economics Foundations showing that 39 per cent of renters who have moved in the last year are paying above the advertised rent for their property.
The Conservative Party will be keen to show that they’re committed to pushing through their ‘better deal for renters’ (which includes rental reforms) if they are to clinch another term in government.
Meanwhile, the Labour Party has already stressed that ending Section 21 evictions will be a top priority, while also hinting at introducing new measures such as compulsory licensing and rent controls if they were to win the election.
4. Rents to keep rising – but at a slower pace
During 2023, average rents continued to rise at a rapid rate. And while further rises are forecast for 2024, it’s clear that many tenants will struggle to afford higher monthly rents.
Data from trade body Propertymark reported an increase in the number of letting agents seeing the price of rent fall during the final few months of the year.
5. Energy efficiency upgrades to remain on the agenda
It came as a big surprise in September 2023 when Prime Minister Rishi Sunak announced that he was scrapping plans to increase the minimum energy efficiency standard for rental properties in England and Wales.
The news was delivered as part of the government’s green review and ended three years of speculation about when new rules would be introduced.
Many landlords who were worried about how much energy efficiency improvements would cost breathed a sigh of relief – and others who had already spent money on improving their energy performance certificate (EPC) rating were disappointed by the U-turn.
Although the plans have been scrapped for now, it seems likely that energy efficiency in rental homes will remain a big talking point throughout 2024.
Not only is the cost of energy bills an ongoing challenge for landlords and tenants, but increasing energy efficiency will be front of mind for many as climate change worsens.
Added to this, in an election year when the challenging parties will set out their plans for higher energy efficiency standards, the Conservative government may come under pressure to commit to a new plan for boosting EPC ratings.
What else should landlords look out for in 2024?
As well as hot topics like rental reforms and the general election, some of the other things landlords should keep an eye on in 2024 include:
- short-term lets – regulation of the short-term lets market is on the way, and what form that will take should become clear during 2024
- landlord licensing – more selective licensing schemes were introduced in 2023, with several consultations for new schemes in 2024 underway
- rising mortgage costs – although interest rates have steadied, 31 per cent of landlords saw their monthly mortgage repayments increase between 2022 and 2023
- more details on property listings – new rules from Trading Standards will require landlords in England (or agents acting on their behalf) to include more information on property listings, such as physical characteristics, utilities, flood risk, and planning permission
- tax costs to keep rising – despite a National Insurance tax break for full-time landlords announced in the Autumn Statement, frozen income tax thresholds and the impact of Section 24 changes will mean many landlords’ HMRC bills will continue to rise in 2024
Don't get left behind with compliance in 2024!
If you are a landlord with rental properties in Sittingbourne or the surrounding areas and are looking for help with property management, get in touch with the team at Quealy & Co. We can be reached on 01795 429836 or email firstname.lastname@example.org and will be delighted to chat with you about your landlord 2024 requirements.
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