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Average rental prices are increasing across the country with rental demand outweighing housing supply, but how can tenants cope with rising rental prices? And what can landlords do to protect their investments?
Almost two-thirds of UK landlords will be forced to raise rental prices by at least 10% within 2023 if market conditions don’t improve. Increasing rental prices is a necessity for landlords seeking to protect their profits, but this will be at the expense of tenants who are unable to keep up with rising costs teamed with the cost of living crisis.
Research by Aldermore Bank found that landlords are conflicted about increasing rental prices at this rate during such a challenging financial time for tenants; with 64% of landlords stating that they would be worried about their tenants being able to keep up with increased monthly payments.
Guidelines on increasing prices for your existing rentals
For landlords who are in a position where increasing rental prices is necessary, the below guidelines must be followed to ensure fair and legal practice and to minimise negative consequences for either party.
- Tenancy agreements should always include how and when rent prices will be reviewed. Landlords are responsible for ensuring they follow-out the agreed pre-agreed process for increasing rent.
- Landlords must seek permission if they want to increase rental prices by more than previously agreed.
- Rental increases must be fair and realistic in consideration of local rental prices.
If the tenancy agreement does not state the procedure for increasing rental prices, landlords can:
- Increase the monthly rent of a property when the lease is renewed.
- Agree a rental increase with the tenant where the tenant must provide a signed written agreement of the rental increase.
- Use a landlord notice to increase rent after a fixed term has ended.
Long-term solutions
Whilst landlords are facing many serious short-term challenges which are driving up rental prices, landlords should continue to think about their investments with a long-term perspective.
Whilst landlords generally seem concerned about rising living costs, Aldermore’s study revealed that 54% of landlords still feel optimistic about the future. Additionally, it continues to be widely accepted that buy-to-let investments are still a stable way to make a good income.
By making intelligent investment plans, avoiding panic-decisions on current rentals and preparing properties for the future (such as improving energy efficiency), there is still a bright future for buy-to-let landlords in the UK.