This morning carries a noteworthy caution suggesting that the expected relaxation of Energy Performance Certificate (EPC) measures for the private rental sector may not have come to fruition after all. In September, Prime Minister Rishi Sunak announced the government’s decision to abandon plans that would have mandated landlords to enhance the energy efficiency of their properties. This shift was prompted by revelations that many landlords would be burdened with significant expenses to meet the prescribed targets. Despite initial reassurances, recent developments hint at the persistence of stricter EPC measures, raising concerns among landlords and stakeholders in the rental sector.
Simultaneously, in September, Sunak implemented a 50% increase in the Boiler Upgrade Grant, now standing at £7,500. This strategic move aimed to support households looking to transition from conventional gas boilers to low-carbon alternatives like heat pumps. The financial boost was a welcomed initiative to facilitate the shift toward environmentally friendly heating solutions. Additionally, Sunak extended the timeline for the ban on installing oil and LPG boilers, as well as new coal heating, for off-gas-grid homes. Originally slated for a phased-out commencement in 2026, this ban is now scheduled to take effect in 2035, providing homeowners with more time to adapt to the evolving landscape of energy-efficient options.
The recent relaxation of measures pertaining to Energy Performance Certificates (EPC) in the rental sector, initially met with relief, now faces a potential reassessment. Rightmove’s General Counsel, David Cox, a former prominent figure in the Association of Residential Letting Agents (ARLA), indicates that there is a likelihood of EPC requirements resurfacing in some form in the near future. Landlords, especially those with properties featuring lower EPC ratings, are advised to maintain caution and contemplate potential improvements.
Despite the current absence of a set deadline and the current emphasis on the Renters’ Reform Bill, Cox suggests that considerations about green improvements may temporarily take a back seat for some landlords. This shift in focus highlights the dynamic nature of regulatory changes and the importance for landlords to stay attuned to potential developments in EPC requirements.
In a recent survey conducted by Rightmove among landlords, a quarter expressed intentions to carry out energy efficiency improvements on properties with ratings below a C. This marks a decline from over a third who had similar plans last year. Correspondingly, among landlords with properties below a C rating, 21 percent now indicate plans to sell them, compared to 33 percent in April 2023.
David Cox emphasizes the need for clarity in the context of the Renters’ Reform Bill, which is proceeding after multiple delays this year. While the bill is expected to take effect by the end of the next year, potential complications from a general election could further impact the timeline. Amidst the intricacies of legislation and compliance in the rental sector, Cox emphasizes the importance of early clarity to enable agents and landlords to plan and prepare effectively.
Experts at Rightmove are forecasting key trends in the private rental sector for 2024, with rents expected to stir controversy. Projections indicate a five percent increase in rents outside of London and a three percent increase within the capital by the end of the year. Despite the current scenario where a tenant with an average salary allocates 51 percent of their take-home income to a typical rental home, compared to 49 percent last year and 46 percent in 2019, rents are anticipated to rise.
Rightmove’s lettings expert, Christian Balshen, highlights the challenge for many tenants with a cap on what they can afford to pay in rent. The increasing number of landlords reducing advertised rents suggests a trend of approaching this affordability cap. Balshen emphasizes the importance for landlords to collaborate closely with local letting agents, leveraging their expertise in the dynamics of the local area to secure the right tenant at the appropriate rent.
In 2023, the rental market witnessed an improvement in dynamics, with more renters seeking to move than available homes. The gap between supply and demand eased slightly, as evidenced by each property advertised by an average letting agent receiving 11 renter inquiries, down from 14 the previous year. Despite the usual seasonal decline in inquiries during winter compared to summer, the figures remained notable, with August 2023 recording 25 inquiries per property.
While mortgage rates have shown a slight decrease, they remain relatively high, with the average five-year fixed mortgage rate dropping below five percent for the first time since June. However, Rightmove anticipates that mortgage rates will likely stay elevated throughout the year. Additionally, saving up for a deposit remains challenging for would-be first-time buyers, especially in the face of broader cost-of-living pressures. This ongoing challenge is expected to contribute to sustained demand in the rental market, as some prospective buyers may need more time to accumulate the necessary funds for their first home.
Tim Bannister, Rightmove’s property expert, underscores the positive early signs in rental market trends. He highlights the significance of the downward trend in mortgage rates and the improved balance between supply and demand. However, Bannister emphasizes that despite the positive indicators, mortgage rates are still higher than in recent years, and the rental market faces challenges due to the persisting shortage of available homes and the difficulties faced by potential first-time buyers.
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