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2023 was an eventful year for the rental market in London. Laws were passed, rental prices soared and guest preferences have changed multiple times.
If you want to position your portfolio to get maximum returns in 2024, you need to analyse all these as well as various economic indicators that happened during the last 12 months. Take a look at the insights that we’ve gathered to understand the factors that will shape the London rental market this 2024.
Rental Price Movement and Property Supply
The most prominent issue in the letting market is the rising rental prices and lower property supply – specifically for long-term rental leases.
In general, the UK enjoyed approximately a 5.7% increase in rental rates (this was between September 2022 and September 2023). If you think that’s high, you’ll be happy to know that London experienced an even greater increase at 6%.
This is good news for landlords and property management services like City Relay because it means properties have a higher chance of earning more. Before you use this information to make decisions about your portfolio, it’s crucial to understand what causes rental prices to rise.
One reason is the shortage in rental housing supply. Some property owners have decided to stop renting and sell their properties to overcome the effects of the rising mortgage interest rates. With fewer rental properties to meet the growing demand, the law of supply and demand ends up pushing prices higher.
What does this mean for your portfolio and the rental market in 2024?
In case you’re one of those wanting to sell their property, check the market conditions first. If it’s a buyer’s market, you might end up getting low-ball offers for your property. Instead of selling your property at a lower value, why not rent for now and sell later? Use the flexible letting strategy to keep your property occupied while you wait for the right time to sell.
You should also keep an eye on the rental prices so you’ll know how to take advantage of them. Be strategic in your decision to determine if raising your prices to accommodate new guests will benefit your property or compromise occupancy rates.
Shift in Guest Behaviour and Preferences
The rising rental prices allow us to make safe assumptions on how the behaviour of residents and guests will be affected. For sure, affordability will be a priority. People will choose shared rentals so they can shoulder costs with others and ease the financial burden.
Or they will opt for smaller rental properties if it means lower rental prices. They could also look for properties located in Lambeth where the average 1-bedroom rent is £1,595 compared to that in Kensington where the average rent is £2,062.
Landlords like you can take advantage of this information to shift your marketing strategies. Boost your efforts in marketing properties in areas where rental prices are lower. As for properties in areas with higher rental prices, make sure your unit looks luxurious enough so it’ll be worth paying for the price you’re asking for.
The Rising Student Population
Another resident demographic that you can monitor is the international student population. There’s a rise in international students in 2023, so it’s to be expected that neighbourhoods within universities and higher education institutions will get a lot of inquiries for student accommodations.
If your property is near an educational institution or within commuting distance of one, students can consider renting your place while they study in London. This will give you a wider market to target so make sure your property is equipped with amenities for students like strong Internet connectivity, adequate space for studying, etc.
Revenge Travel is Over
One of the after-effects of the pandemic is the phenomenon called “revenge travel.” It refers to the influx of travellers who felt like they had to pay back all the lost travel plans caused by the pandemic.
This was a good thing because it brought more travellers and visitors from all over the world. In effect, it increased the demand for properties further. However, this phenomenon seems to be over. People have started to calm down and return to their usual routine.
While it dampened the London short-letting industry towards the latter half of 2023, it won’t drag out in 2024. The Olympics is set to happen in Paris during the summer of 2024. It’s safe for us to expect that the tourism industry in London will also benefit from that. Condition your property to stand out during that time so you can maximise the rental income potential.
The Renter’s Reform Bill
Although the Renter’s Reform Bill has passed the 2nd reading in the House of Commons, it still has a long way to go before a full implementation can happen. Until then, you should keep an eye out for this development as it unfolds.
According to the National Residential Landlords Association, landlords aren’t keen on the changes that this reform will bring. With landlords voicing out their opinions, there’s always a chance that the government will agree to review and alter some of the details in the bill.
However it turns out, you can expect that it will have a significant effect on lease agreements. You want to be able to adjust your contracts accordingly so you can optimise your rental property and benefit from the changes.
How to Prepare Your Portfolio for 2024
The ever-evolving property market requires constant vigilance for landlords and property owners like you. It’s important to stay updated with the latest market trends to keep your rents aligned and competitive. Among the things that you need to focus on are the following areas.
- Housing Supply. Given the supply issue, there’s a high chance that multiple guests are inquiring about the same property. Landlords should thoroughly screen potential guests so they can make the right choice and avoid irresponsible guests.
- Property maintenance and expenses. Landlords and property owners should also stay proactive in addressing maintenance issues and meeting their financial obligations like insurance, tax payments, etc. These play a vital role in the stability of property portfolios and their overall growth.
- Sustainability. One thing that landlords and property owners should focus on is making their units more sustainable. Those who are in between tenancies or booking schedules should consider putting up their properties for a maintenance check. See if there’s a chance to furnish the property with more energy-efficient lighting fixtures and appliances.
- Virtual marketing. Optimising properties for virtual marketing and using proptech to manage properties will also play an important role so landlords and property owners should consider these as well.
A Proactive Step to Achieve Portfolio Growth
The future of the rental property market in 2024 is very promising. There’s still a lot of room for growth so you need to get your property ready to benefit from it.
The key to thriving in the dynamic rental property market is to educate yourself. Understand the events of 2023 so you can make calculated assumptions about what will happen in 2024. The more you know, the better you can position your portfolio to grow this year.
Partnering with a reputable property management company is a great way to prepare your portfolio for 2024 and stay ahead of the curve. You can rely on their experience and expertise to maximise the rental income potential of your property.
Let’s talk about the possibilities that your portfolio can use to grow significantly in the coming months. City Relay can help optimise your rental income through flexible letting. Get in touch with us so we can explore opportunities and maximise the returns from your property investments.
