The new year has certainly started on an upbeat note for the lettings sector. A survey by Finbri found more than 50% of UK property investors intend to expand their property portfolios in 2023. Any surge in activity will be keenly felt among more experienced landlords, with 67.92% of those who have more than five investment properties planning to add further buy-to-lets to their portfolio over the next year.
Landlords weighing up what property type to buy next are being encouraged to consider the wider economic landscape and put flats on their radar. While inflation looks to be edging downwards, it will take time for fuel, food and cost-of-living prices to decrease, which will continue to place pressure on the finances of tenants.
One budget element that looks set to influence the immediate lettings market is the cost of rent. According to HomeLet’s most recent Rental Index, the UK’s average rental value is £1,174 – 9.4% higher than the same time period in 2022.
Statistics published by Yahoo Finance put a different spin on the current cost of renting, revealing that the average household in the UK now spends 42% of their post-tax income on rent. With less and less money available for daily basics, renters are increasingly looking for properties that cost less to run.
A new report by Help Me Fix has added detail to this picture, with its research showing how much energy bills are in specific property types. It found the average energy bill in a detached property is £3,300, while a semi-detached property now has an average annual energy bill of £2,650. Marginally cheaper to run are terraced homes, with an average annual bill of £2,350. In contrast, flats currently attract an average annual energy bill of £1,750 – a saving of almost £1,000 per year.
It will come as no surprise that ‘bills included’ had become the most popular search term among renters when Rightmove last conducted its ‘popular search term’ analysis. Sadly, most landlords will not be in a position to offer tenants this type of package for as long as there is volatility surrounding gas and electricity prices.
When looking at the bigger picture, investing in flats is a path to explore in 2023, especially if landlords want to appeal to the biggest tenant audience. A flat’s more affordable rent and running costs will find favour with many first-time renters and those looking to reduce outgoings. There’s also plenty of anecdotal evidence to suggest that demand for city centre living is on the rise as we put the pandemic firmly in our past.
If you are looking to make your first buy-to-let acquisition in 2023 or would like to grow an investment portfolio you already own, talk to us for advice and for a list of available flats to purchase.