It’s that time of year, when Business Link Magazine invites the region’s business leaders to offer up their predictions for the year ahead.
It has become something of a tradition, given that we’ve been doing this now for over 30 years.
Here we speak to Luke Gidney, Managing Director at estate agent HOP.
The rentals market in Leeds has been very busy in the last 12 months and rents in many areas increased by between 10% and 12% in 2023. We now typically receive between 25 and 30 enquiries for every property we list and will pre-qualify around 10 people for a viewing. Of these we usually expect three to apply, so it’s a very competitive market for tenants.
Generally, property stock levels do increase slightly in December and January as people usually try to avoid moving during the Christmas period. This is a trend that we are seeing this year as normal, so any tenants looking for a home might have a slightly better chance if they act now.
Looking ahead to 2024, the shortage of available rental property looks set to be an ongoing theme. Substantial tax increases and higher interest rates combined with some laborious legislation mean many landlords continue to sell up. As a result, we expect rents to rise further, although possibly at a slightly slower pace than in 2023, but growth of between 8% and 10% would come as no surprise.
However, the reality is that many tenants are already over-stretched financially, and lots are already facing a tough time due to sky high energy bills and food inflation. There has been an increase in the number of tenants falling into rental arrears in 2023 and this is likely to remain an issue in 2024.
This is also driving the popularity of rent guarantee insurance, often known as tenant default insurance, amongst landlords, which typically costs around £250 a year and gives landlords peace of mind that they are protected from financial losses incurred by tenants failing to pay their rent.
Ultimately, the market needs more rental property and although landlords are selling up in droves, there are others who are recognising the opportunities that the current market offers. This is particularly true for seasoned investors. Our specialist investment division agreed approximately £5million worth of off-market investment sales in 2023.
How this pans out in 2024 will depend on what interest rates do. However, there’s no doubt Leeds is still very attractive to investors and especially because it offers an excellent average rental yield of 6.3%, which means you can get even higher yields in certain pockets of the city.
In some areas of Leeds, you can find two-bedroom houses at £130,000 and three-bedroom homes around £180,000, so it still offers great value for money. These would rent for £850 and £975 respectively.
Plus, there’s the potential for capital growth over the medium to long term. Leeds sits comfortably in the top 10 table for the best UK cities to invest in property, and there is an abundance of reasons why. The city brings together several compelling factors – a growing younger population, thriving economy, great value investment and high yields, making it a savvy choice for investors on the hunt for decent returns.
Research by JLL shows that Leeds is consistently one of the top five cities in the UK for capital growth and our own five-year prediction suggests house price growth of 14% for Leeds between 2023 and 2027. With a skilled workforce of 1.4 million people, Leeds is fast becoming a leading business hub in the UK, hosting big companies including newcomers Channel 4, BT, Sky, First Direct and Asda. The city has also been named the “Digital Capital of the North” with one of the fastest-growing tech hubs in the UK.
With continued investment being pumped into the city with the likes of the exciting new South Bank region and TransPennine Routes upgrades being approved, Leeds isn’t putting the brakes on anytime soon.
