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Rents in the UK: A Property Market in Flux

Rents in the UK: A Property Market in Flux

In the past year, rents for new lets in the UK have seen a significant increase of 6.6%, according to Zoopla, a leading property portal.

While this might seem steep, it's the slowest annual rise in rental prices recorded in the past two and a half years. The average rent for a new let has climbed by £80 a month compared to the previous year, bringing the typical monthly rent to £1,226 as of April.

Despite this rise, the demand for rental properties remains high, with an average of 15 prospective tenants vying for each available home. This is a notable increase from pre-pandemic levels, where only six people competed for each rental property. Although demand has somewhat eased, it still significantly outstrips the supply of available rental homes.

Several factors have contributed to the sharp rise in rents over the past two years. A notable driver has been the surge in demand from students and other groups. However, the primary issue has been the insufficient supply of rental properties to meet this demand. Landlords, facing increased costs, have either passed these costs onto tenants or exited the market entirely by selling their properties. As a result, letting agents report that properties are being listed and rented out much faster than they were before the pandemic.

Looking ahead, Zoopla predicts a continued slowdown in rental price growth, expecting it to drop to 5% in 2024. This anticipated deceleration is attributed to a further easing in tenant demand rather than an increase in the supply of rental properties.

Impact on the Buy-to-Let Market

This rental market scenario has significant implications for the buy-to-let market. As rents rise more slowly and demand eases, potential and current landlords may find the market less attractive. Higher costs and regulatory pressures have already pushed some landlords to sell their properties, reducing the supply of rental homes. If rental growth continues to slow, it could lead to reduced profitability for buy-to-let investors, potentially discouraging new investments in this sector.

Moreover, the competitive rental market, with multiple tenants vying for each property, might push some tenants towards homeownership if they can afford it. This shift could further affect demand for rental properties, potentially stabilising or even reducing rental prices in the long term. For landlords, this means carefully weighing the risks and benefits of staying in or entering the buy-to-let market in the current economic climate.

In conclusion, while rental prices are still increasing, the rate of growth is slowing. This shift may bring some relief to tenants but presents new challenges and considerations for landlords and investors in the buy-to-let market. As the market adjusts, both tenants and landlords will need to navigate these changes with careful planning and consideration of the evolving economic landscape.

Source: BBC


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