What is the forecast for the rental market in 2020?

This article is part of
Guide to Buy-to-let

What is the forecast for the rental market in 2020?

As the number of people renting in the UK continues to grow at a rapid speed, private landlords increasingly find themselves at the heart of the country’s housing market and subject to closer scrutiny and regulatory changes by the government. 

Damian Thompson, director of mortgages at Aldermore, says: “The number of people renting in the UK has been rapidly growing, up 1.7m in 10 years, so private landlords are an increasingly central part of the housing market as supporting a robust and strong private rented sector becomes more essential.

“The UK housing market has never been a singular thing, instead it is made up of multiple smaller markets with their own unique conditions and challenges.

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"There have been numerous regulatory changes recently and persistent economic uncertainty but this affects every region differently.”

The latest potential change for landlords and tenancy contracts to hit the headlines is in relation to pets.

If the latest overhaul is passed, landlords will no longer be able to pass on a tenant simply because they have a pet. With just 7 per cent of rental properties currently listed as allowing pets, this could be a real game changer.

It is also widely expected that landlords will be served a blow in April, as Paul Stockwell, chief commercial officer at Gatehouse Bank, explains: “The buy-to-let market has undergone considerable tax and regulatory changes in recent years, and 2020 will be no different, with further adjustments for buy-to-let tax relief on the horizon for April.
“These changes are making some owners re-evaluate their investments, but this has provided significant opportunities for new investors to enter the market and an incentive for existing landlords to search for further opportunities for improved buy-to-let rates.”

Yields continue to rise

In spite of the potential changes and tax implications, yields in 2020 are not expected to suffer too much, although new landlords and investors are being urged to seek properties away from the larger cities. 

“The market as a whole may have slowed in the last year but many locations, especially in the Midlands and North, are continuing to see significant house price growth,” Chrysanthy Pispinis, director at Post Office Money, highlights.

“These properties are potentially good mid-term investments, particularly as they sit in locations that continue to be affordable, even for first-time buyers, which can be a great indication of future growth hotspots.”

According to Post Office Money research, cities continuing to see growth include Cardiff (9 per cent), Sheffield (7 per cent), Nottingham and Birmingham (6 per cent). 

Mark Homer, co-founder of Progressive Property, agrees that while gross rental yields on single let residential property in the South East may not do better than 5 per cent, this should rise to 7 per cent in areas of the Midlands, while some Northern towns will be offering rental properties attracting a 10 per cent plus yield.