Both tenants and landlords are reassessing their approaches to rental agreements amidst ongoing economic challenges, the latest Lettings Report from Leaders Romans Group (LRG) reveals.
New data indicates a growing preference for longer-term tenancies, as both parties seek greater security in an unpredictable market.
The report reveals that 44% of tenants and an equal percentage of landlords now favour one-year fixed-term contracts.
And around four out of 10 (37%) from each group express interest in periodic tenancies without fixed end dates, highlighting a mutual desire for flexibility coupled with stability.
REAL-WORLD CHALLENGES
Supporting this trend, comments from landlords reveal real-world challenges and motivations.
One landlord shared: “As a new landlord, I’d like to build open, transparent relationships with my tenants to encourage longer-term rentals.”
Another landlord highlighted regional challenges, stating: “The reduction of rental properties in Stamford has pushed tenants to seek longer agreements to ensure they can stay in the area.”
These insights illustrate the dynamic interactions between tenant needs and landlord strategies in today’s market.
RENT INCREASE
This shift also aligns with broader market data. According to the Office for National Statistics, average UK private rents increased by 8.4% in the 12 months to September 2024, with London experiencing a 9.8% rise, intensifying affordability concerns and prompting tenants to secure longer agreements to lock in rates and avoid future increases.
To retain tenants for the long term, many landlords expressed an interest in implementing strategies aimed at enhancing tenant loyalty. According to the latest data, around 30% of landlords would considering investing in property upgrades.
Additionally, 15% of landlords are open to offering rental discounts, while 6% would explore flexible lease terms, demonstrating a commitment to fostering strong tenant relationships and reducing turnover.
ECONOMIC PRESSURES
These strategies indicate a clear landlord focus on tenant retention, as the rental market adjusts to economic pressures and shifts in tenant preferences.
The LRG report also highlights a slight slowdown in rental demand, with certain areas experiencing rent reductions to maintain tenant interest.
National data supports this trend, showing a broader softening in the rental market due to affordability concerns. For example, Zoopla’s September 2024 Rental Market Reportnotes that rental inflation has slowed to 5.4%, the lowest level in almost three years.
However, the Royal Institution of Chartered Surveyors (RICS) has recently reported a deepening rental crisis, with a significant gap between supply and demand.
STABILITY AND LONGER-TERM AGREEMENTS
Allison Thompson, National Lettings Managing Director at LRG, says: “The economic landscape has heightened the value of stability for tenants and landlords alike.
“As inflationary pressures and the cost of living rise, we’re seeing tenants opt for longer-term agreements as a way to secure current rental rates, while landlords are prioritising tenant retention through incentives and flexible terms.
“As both landlords and tenants navigate these economic pressures, flexibility and incentives are emerging as key factors in tenancy negotiations.
“The shift towards longer-term arrangements provides an opportunity for industry stakeholders to meet evolving tenant demands while ensuring stability across the rental market.”
