As we begin the new year of 2023, rental rates are starting to decline from previous years. According to our recent analytics, we are seeing roughly a 3% difference in rental prices compared to previous years. This trend is being attributed to a number of factors, including an increase in the inventory of rental homes and a slowdown in the so-called “great migration” of people moving to urban areas.
Rental rates have dropped in recent times due to a surplus of available rental homes in the market. This surplus can be attributed to an increase in the construction of new rental properties, particularly those that are being built specifically for the purpose of renting. This trend, known as “built to rent” communities, has been on the rise as interest rates have gone up, making it harder for people to afford buying a home.
As a result, developers and investors are turning towards building rental properties as an alternative investment opportunity. This increase in supply of rental properties has led to competition among landlords, as they try to attract tenants by offering lower rental prices. This competition is beneficial for renters, as it results in more options and lower rental costs. However, it can also be challenging for landlords, as they may need to lower their prices in order to remain competitive, which can affect their profits.
Overall, the surplus of available rental homes and the increased construction of “built to rent” communities have led to a decrease in rental rates, as landlords compete to attract tenants. This trend can be expected to continue, as interest rates continue to be out of reach and the demand for rental properties remains high.
Furthermore, the slowdown in the great migration of people moving to urban areas has also contributed to the decline in rental rates. In recent years, many people have been drawn to the amenities and job opportunities of big cities. However, with the rise of remote work, many people have started to reconsider their living arrangements, opting for more suburban or rural areas where rental prices are typically lower. This shift in population has also contributed to the decline in rental prices.
While the decline in rental rates is good news for renters, landlords will need to adjust their rental practices in 2023 to ensure their investment stays profitable. Some landlords may choose to lower their rental prices to attract tenants, while others may choose to hire a professional property manager to help them navigate the changing market.
It’s important to keep in mind that the rental market is a dynamic system and this window of lower rental prices is likely to be short-lived. We predict that the rental market will return to an average growth in 2024. Therefore, landlords and renters should stay informed about the market trend and adjust their plans accordingly.
In conclusion, rental rates are starting to decline from last year, with a roughly 3% difference seen as we start the new year of 2023. This trend is being attributed to an increase in the inventory of rental homes, a slowdown in the great migration of people moving to urban areas, and the rise of “built to rent” communities as interest rates rose and many were unable to afford to buy. While this news is positive for renters, landlords will need to adjust their rental practices to ensure their investment stays profitable and this window of lower rental prices is likely to be short-lived.