What can buy-to-let landlords anticipate from 2024 after a year marked by soaring expenses and uncertainty over upcoming legislation?

Continue reading for my five forecasts for the rental market, which will address the following areas:

1. Rental reforms.
2. Landlords’ selling plans.
3. The impact of the general election.
4. Average rent rises.
5. The future of energy efficiency.

1. Rental reforms could edge closer to becoming law.

The Renters’ Reform Bill’s introduction in May 2023, following a few years of anticipation, was one of the most significant buy-to-let developments of 2023.

The bill outlined its intentions to outlaw Section 21 evictions, facilitate tenant requests to maintain pets, and terminate fixed-term tenancies with the rental market in England.

Since then, the bill has advanced through the committee stage and first and second readings. The government made a dramatic U-turn ahead of the committee stage, announcing that Section 21 evictions would not end until the legal system was reformed.

It is improbable that any legislation will be passed until late 2024 or early 2025 considering this. The approaching general election is another factor to consider as it may result in more delays and uncertainty.

More information on the government’s intentions to restructure the legal system to put an end to Section 21 evictions may be made public in the upcoming months. The most recent version of the bill, which incorporates the committee-passed revisions, is available here.

2. Landlords will continue to sell due to challenging conditions.

Landlords may contemplate selling a property in the upcoming months for a variety of reasons, including rising prices, restricted tax relief, and evolving legislation.

A study carried out by the Open Property Group found, a third of landlords are thinking about retiring or getting out of the business because of legal troubles and growing expenses.

It wouldn’t be shocking to see landlords continuing to weigh their alternatives in 2024 given that the state of the market is probably going to stay similar what it was last year.

The capital gains tax limit will be further reduced in April 2024, from £6,000 to £3,000. This could persuade some landlords to persevere.

The CGT allowance was £12,000 as recently as March 2023. For many landlords who have recently chosen to sell, these changes have resulted in dramatically higher tax payments.

Are there still reasons to buy rental property?

Given the strong demand for rental properties, purchasing can still be a wise choice for certain investors.

The National Residential Landlords Association conducted a study which revealed that the demand for rentals in the third quarter of 2023 was three times higher than the same period in Q3 2019, prior to 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 upcoming general election, which must happen by the end of January 2025, is probably going to have a big effect on rental prices. This is because politicians will be eager to win over the enormous number of landlords and tenants in the country.

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 instance, it is known that landlords consider one of their biggest obstacles to be the government’s unclear and ever-changing legislation. Concurrently, a lot of tenants are having to deal with skyrocketing rent; according to research by think tank New Economics Foundations, 39% of renters who moved in within the last year are paying more than what was advertised for their flat.

If the Conservative Party is to win another term in office, they will want to demonstrate that they are dedicated to implementing their “better deal for renters,” which includes rental reforms.

In the meantime, the Labour Party has already made it clear that stopping Section 21 evictions will be their main priority. If they win the election, they may potentially introduce new policies like mandatory licencing and rent controls.

4. Rents to keep rising – but at a slower pace.

The average rent increased at a very quick pace in 2023. Even though 2024 is expected to see even more increases, it is certain that many tenants will find it difficult to pay the increased monthly rent.

The average rental price peaked in August 2023 and then continued to cool for the remainder of the year, according to data from estate firm Hamptons. Supporting data from trade body Propertymark, which showed an increase in the number of letting agents witnessing a decline in rent prices in the latter few months of the year.

Savills has forecast rental growth of six per cent in 2024, down from the 9.5 per cent recorded in 2024. The property consultancy says rents will then hit an ‘affordability ceiling’ in 2025.

5. Energy efficiency upgrades to remain on the agenda.

Prime Minister Rishi Sunak’s announcement in September 2023 that he was abandoning plans to raise the minimum energy efficiency standard for rental houses in England and Wales was a major surprise.

The announcement put an end to three years of rumours over the introduction date of new regulations and was made as part of the government’s green review.

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.

Even if the plans have been shelved for the time being, it seems certain that 2024 will see a lot of discussion about energy efficiency in rental properties.

Landlords and tenants face constant challenges due to the expense of energy bills, but if climate change gets worse, many will prioritise boosting energy efficiency.

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, many landlords saw their monthly mortgage repayments increase between 2022 and 2023

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

Author: Jag Chaggar