Tenant Demand May Remain High as Renters Suggest They’ll Never Buy

According to research from TSB, over a third of people renting in the UK think they will never own a home.

In addition, only 29% of respondents expected to buy their own property within five years.

Let’s look at the research in greater detail and discuss what it means for those interested in buying rental property in 2024.

The TSB research indicated numerous challenges facing tenants in 2023 as they attempt to navigate from the private rented sector to home ownership.

45% of respondents said that property prices were the main obstacle to buying a property. However, respondents also mentioned being unable to save for a deposit and not qualifying for a mortgage were key difficulties in purchasing a home.

According to Deby Herring, TSB Head of Mortgages: “Whilst the levelling out of prices might be good for first-time buyers, it isn’t just the cost of housing holding them back. A range of other factors makes it hard for them to take their first step.”

It appears that tenant demand will remain high for the foreseeable future, with many tenants priced out of buying a home. However, if you’re able to purchase a buy-to-let property in the UK, you’ll have a larger tenant pool to which you can advertise your property.

The TSB survey reveals a few reasons why tenant demand is significantly high. With high demand comes higher rental prices. The average rent rose 6.1% for private tenants between October 2022 and October 2023, and landlords have seen gross yields rise. Coupled with subdued property price growth, the market could prove lucrative for buyers, particularly with mortgage rates coming down.

While high inflation and substantial interest rates have put property sales on the back burner, 2023 has proved resilient in the face of economic uncertainty. Many forecasters predicted a considerable price decline of -10 %. However, the latest Halifax House Price Index showed an annual change of -1.0%.

So, how do buy-to-let landlords give themselves the best chance to achieve high yields? And what is an investment property strategy to help them make the most of the current tenancy demand situation?

When considering property investment in the UK, look for desirable places to live with good-value properties. For instance, Liverpool has an average property price of under £180,000, according to the HM Land Registry UK House Price Index.

Property Investors should then whittle those places down to places with high average rental yields. While returns are not always entirely assured, places like Liverpool typically have high yields due to the desirability of living in the city centre, promising business opportunities, and huge regeneration in areas like the Baltic Triangle and Knowledge Quarter, driving up rental prices. For this reason, rental yields of 7% may be possible in certain postcodes.

With mortgage rates falling and the property market stabilising, prospective investors can enjoy the fruits of high tenancy demand before prices rise over the next 24 months. With rental prices set to increase by another 6% in 2024, gross yields may result in a good ROI.

For more information on the safest property investment techniques, check out our guide on the best investments for 2023. We also have a wide range of property investment guides for different UK areas – including a Stoke-on-Trent buy-to-let guide and a buy-to-let Warrington guide – to help you understand the UK housing market better.