The UK housing market has experienced a rollercoaster ride in the past few years, with the pandemic causing unprecedented shifts in demand and supply. Landlords have had to navigate through various challenges, including changes in regulation, falling rents, and increased competition. So, is now a good time to be a landlord? Let’s explore the latest data and trends to help answer this question.

The Mortgage Market

One of the key factors affecting landlords is the mortgage market. A more competitive mortgage market is beginning to emerge in the UK, with several lenders introducing more competitive fixed-rate offers. For example, one lender has released a new two-year fixed deal at 4.84%, one of the most competitive rates on the market. A fall in house prices coupled with a fall in mortgage rates to around 4% could see buyers’ mortgage repayments reduce by as much as 25% by the end of 2023, according to wealth fund Quilter’s analysis.

However, the number of mortgage approvals in November 2022 fell to 47,279, the lowest level since May 2020. It is likely that we will begin to see a gradual uptick in the number of deals approved as more competitive deals enter the market. It is worth noting that a proportion of the fall in activity can be linked to the end of the Help to Buy scheme in October, skewing first-time buyer activity.

Sales Market

The Royal Institution of Chartered Surveyors (RICS) reported a drop in house prices and new buyer inquiries in December 2022, with a net balance of 32% of professionals reporting a fall in house prices across London. The time properties spend on the market has also increased, with homes taking 52 days to sell in December, seven days longer than in November.

The Land Registry house price data for November 2022, however, still shows annual growth in double digits due to the time lag between offer and completion. But monthly growth rates are slowing down as rising mortgage rates and a squeeze on household budgets are starting to impact the market. The Nationwide House Price Index reports a fourth monthly decline in annual growth in December 2022, with house prices rising by 2.8%. Prices rose 10.3% in November 2022 compared with November 2021, and prices are now 27% higher than they were in 2019.

Rental Market

The rental market is also experiencing its own challenges. The Homelet Index reports an imbalance between supply and demand in both the UK and London rental markets, with tenants staying in the rental sector for longer due to higher interest rates making affordability an issue. This, coupled with the lack of stock coming onto the market, is affecting the rental market.

Forecasts for 2023

While the UK housing market has weathered economic storms in the past, it still faces challenges as we head into 2023. In Central London, a larger proportion of both overseas and cash buyers are less reliant on mortgages and, therefore, less affected by rate rises. With a lack of stock coming onto the market, it is expected that this will underpin values in Central London over the next year by 2.5%.

Outside of Central London, the combination of higher rates, poorer market sentiment, and the cost-of-living squeeze is expected to cause a fall in both prices and activity levels across the UK housing market in 2023. Prices are forecasted to drop by 6% UK-wide in 2023 before recovering in late 2024 as interest rates fall back and inflation is contained.

Is Now a Good Time to Be a Landlord?

Given the current economic climate, it’s reasonable to question whether now is a good time to be a landlord. However, despite the challenges, there are still reasons to be optimistic about the rental market.

Here are some factors to consider when deciding whether now is a good time to be a landlord:

Strong Demand for Rental Properties

Despite the uncertainty in the sales market, demand for rental properties remains high. The imbalance between supply and demand means that rents are likely to remain strong in the coming months, and landlords can expect a steady flow of tenants.

Potential for High Rental Yields

While property prices are expected to fall in 2023, rents are likely to remain high, especially in areas where there is strong demand. This means that landlords could still achieve high rental yields, even if the capital value of their property falls.

Competitive Mortgage Rates

While interest rates have risen, mortgage rates remain relatively competitive. This means that landlords who can secure a good mortgage deal can still benefit from low borrowing costs.

Equity-Rich Landlords in a Stronger Position

Many landlords who have owned their properties for a long time will have significant equity built up, putting them in a stronger position to weather any economic challenges. These landlords may be able to weather any short-term market volatility and hold onto their properties until conditions improve.

Professional Management Can Mitigate Risks

Working with a professional estate agent, like Pullen Estate Agents, can help mitigate some of the risks associated with being a landlord. An experienced estate agent can help you navigate any changes in the market and ensure that you are complying with all legal and regulatory requirements.

Conclusion

In conclusion, the UK housing market is facing some challenges in 2023. However, for landlords, there are still reasons to be optimistic. Demand for rental properties remains strong, and with competitive mortgage rates, equity-rich landlords, and professional management, there are still opportunities to achieve high rental yields. If you’re considering becoming a landlord, or you’re looking to expand your property portfolio, contact Pullen Estate Agents today to discuss your options.