Will 2024 be a good Year for Landlords?

The projected trend for 2024 of falling house prices and rising rents may be a positive factor for landlords, say market analysts.

Largely due to a nationwide shortage of rental properties, the trend for increasing rents will give landlords a chance to stabilise their own finances following the challenges of the economic crisis.

For the 38% of landlords who own their property outright, the rent rises nationwide mean their income could increase significantly, without the accompanying expenditure on mortgage repayments.

House price fall concept
© Andrii Yalanskyi / Shutterstock

Cash-strapped landlords have increased rents to keep up with their own higher costs in recent years. Financial pressure has already caused many to sell up, with 14% selling off their buy-to-let properties during 2023. The main reason cited for the sale was financial problems caused by rising costs, according to research by Hamptons.

Now, for landlords still in the industry, the projections for 2024 could put a positive slant on the rentals market for the first time in post-pandemic Britain.


UK house prices falling

UK house prices have been falling since early 2023, according to data from the Land Registry, which bases its UK House Price Index on property sales and not asking prices.

London has seen the biggest drop in prices, followed by Wales, the east of England and the south-east.

Various estate agents and financial institutions have carried out their own research into falling property prices. Halifax has predicted prices will reduce by up to 4% this year. Zoopla and Rightmove are slightly less dramatic, forecasting a drop of 2% and 1% respectively.


How much have house prices dropped?

Land Registry data reveals the average house price in the UK is £288,000 – a fall of 1.2% in the past 12 months. The all-time high, recorded in September 2022, was £292,000.

The property market is extremely complex. According to a report in Which magazine, Halifax’s data showed a 1.7% increase in house prices last year. This has bucked the trend and is viewed as a positive sign that the market may be starting to recover.

The rise in prices is due to a shortage of properties on the market.


Impact on landlords

According to Hamptons’ research, the number of rental homes in the UK has shrunk by 294,300 since 2016. The biggest sell-off of properties by landlords has been in Scotland.

In recent years, higher mortgage costs, changes in the taxing of buy-to-let incomes and 14 consecutive interest rate increases have all played a role in making buy-to-let homes less attractive to potential investors.

This reduction in rental properties across the UK has led to the current shortage of rental homes. Many landlords have sold one to two buy-to-let homes from their portfolio to reduce their mortgage expenditure. Others have sold up altogether.

The number of HMOs has experienced a sharp decline, as the sector has shrunk by 2.4% since 2021. However, some market analysts suggest this could be a good time for property investors to consider expanding their portfolio again.

Taking advantage of falling house prices and higher rents could be a shrewd business move in the current climate.

Some experts are speculating that interest rates could be reduced in March 2024 – this is good news for homeowners and buy-to-let investors.

According to a report in The Times, the government’s scrapping of new energy regulations, in addition to rent increases, could turn the tide in 2024 for beleaguered landlords.

Earlier, the government had revealed plans to make rented homes in England and Wales more energy-efficient by introducing new regulations. Currently, privately rented properties must have a minimum energy rating of E, but the government planned to raise this in April 2028 to a C-rating.

Trade organisations said this was set to cost the average landlord between £8,000 and £10,000 in home improvement costs. However, Prime Minister Rishi Sunak said he was scrapping the plans, as he felt it was “wrong” to burden already struggling landlords with additional renovation costs.

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