As the end of the year approaches, people’s eyes naturally cast forward to what the future has in store. And there is no need for a crystal ball to safely predict that the UK’s rental market is set to undergo an important transformation in 2018. Along with the property sector as a whole, the lettings space is facing significant pressures that both the government and industry bodies must work together to address; the coming 12 months will therefore almost certainly play host to some significant changes for landlords and tenants.
Meeting rising rental demand
One of the most obvious drivers of this change is that the number of people living in rental accommodation is forecast to rise steadily next year and beyond. According to PWC, the population of private renters in the UK is predicted to grow from 2016’s figure of 5.4 million to reach 7.2 million by 2021. In turn, this will place further strain on the rental market and the need for enough suitable properties in areas of high demand for renters to choose from.
To help meet demand, the Conservative Party has made clear its intention to focus on the construction of new houses – the number of homes being built in England is currently 21% higher than last year, a number not seen since the financial crisis almost a decade ago. Indeed, to match demand from renters and buyers alike, the government anticipates that between 275,000 and 300,000 new homes will need to be built each year to alleviate market pressure. As such, improving supply for the rental market will remain a critical target for the public sector in 2018.
Further legislative changes afoot?
Away from the construction drive, it is possible that new legislative changes will be introduced next year. Following on from the banning of letting agent fees in March 2017, Labour leader Jeremy Corbyn has been vocal in pushing for greater rent controls, such as no increases in rental prices above inflation. While Theresa May and her party have fought off the initial calls for another general election after losing seats in June’s vote, the Conservatives remain under pressure and may have to take heed of calls for changes in the rental market. This means more regulatory changes could be brought in over the months ahead.
Meanwhile, other policies may come into effect that will either directly or indirectly impact tenants and landlords. For example, changes to Stamp Duty or the expansion of Help to Buy initiative could see more people get on the property ladder – indeed, the government has long stressed its desire to turn Generation Rent into Generation Buy, but whether or not meaningful progress will be made towards this goal remains to be seen.
The proptech revolution
Whatever steps the government takes in 2018 to address critical issues in the rental market, improve the protection of tenants’ interests and help more people get onto the property ladder, it is the private sector that will most likely implement the greatest changes next year. Specifically, the rise of property technology – or proptech – is going to have a significant impact on all levels of the rental market, for tenants, landlords and lettings agents.
In 2016, the share prices of Foxtons and Countrywide fell by 47.5% and 56.9% respectively. Meanwhile, the number of tech startups in the UK increased by a massive 200%, with proptech accounting for a large proportion of this. Evidently, the tide is turning; started by the likes of Zoopla and Purplebricks, there is now a new wave of proptech firms fundamentally changing the entire real estate sector.
In particular, over recent years there has been a notable rise in the number of ‘online’ letting agents; some are newcomers to the market, while more traditional high street agents have also attempted to rebrand themselves as such. The reality is that many businesses claiming to offer online property services, where the house-hunter can view and secure a rental property online, are actually hybrid solutions. Rental properties may be listed online, but much of the process – such as registering your interest, completing the paperwork and sending over a deposit – actually still takes place offline.
New research commissioned by LetBritain among more than 2,000 UK adults illustrated the frustration that renters have with these outdated processes. It found that 51% of consumers now go online to source the majority of their products and services, while 29% actively avoid those businesses that do not offer an online service. Moreover, 31% think that using high-street letting agents to rent out a property is overly-burdened by reams of paperwork, with a quarter (25%) preferring to use online-only services to source and secure a property.
Bringing lettings into the 21st Century
The coming 12 months will see these issues addressed. Next year proptech will continue its exponential rise – genuine online and virtual letting agents will bring the rental process into the 21st Century, making it quicker, easier, cheaper and more transparent for both the tenant and the landlord.
With the UK’s population of private renters forecast to grow, and increasing pressure being placed on both the private and public sectors to help improve the fortunes of Generation Rent, 2018 will bring about important changes in the rental market. Not only will the government continue its efforts to alleviate rental demand, but virtual lettings agencies and innovative proptech firms will also rise in prominence in a bid to tackle the current issues that are rife in the industry.
As a result, the year ahead should be a period of progress to help all aspects of the country’s rental market, modernising processes and empowering tenants and landlords with greater control and choice.
Fareed Nabir is CEO of LetBritain