Rents are still on the rise in all but two UK regions

Rents have risen at the same rate as earnings growth in the UK, as tenant appetite remains high across the majority of the country.

The latest report from Goodlord has revealed that UK rents have increased by 5.7% on average since April last year, although as always there are regional variations. The only two places in the country where rental prices have decreased are the West Midlands, down 1% year-on-year, and Greater London, down 0.15%.

Still, Greater London is unsurprisingly still the home of the highest rental costs in the country, with an average price of £1,951 per month. By contrast, tenants in the north east enjoy the lowest rents of an average £863 per month. Yet for landlords, thanks to the lower property prices in this part of the country, yields tend to be considerably stronger.

Recent reports have pinpointed the north east and the north west as having the highest rental yields in the country, making these regions a particular target among investors whose focus is on rental income. At the same time, property prices in these regions has also outperformed the rest of the country, meaning better returns from capital appreciation too.

In Goodlord’s latest index, it was revealed that rents across the UK now average £1,166 per month, up from £1,103 this time last year. Since last month, rents have grown by an average of 0.6%, showing that they remain on an upward trajectory due to the ongoing disparity between demand and supply.

Renting for longer

With higher mortgage rates and difficult financial circumstances – along with changes in the way we live – continuing to keep tenants in the rental market for longer before getting onto the housing ladder, unless there are major changes in the sector, industry experts believe properties in the UK rental market will remain in high demand.

However, it seems that average earnings growth is currently keeping pace with rising rents. The latest data from the Office for National Statistics (ONS) shows that annual growth in regular earnings (excluding bonuses) was 6% between December 2023 and February 2024.

Annual growth in real terms – adjusted for inflation using the Consumer Prices Index, including owner-occupiers’ housing costs – for regular pay was 1.9%.

Elsewhere, ONS research reveals that the average age to own a home has increased by 12.5% between 2004 and 2022, from 32 years old to 36 years old – the highest it has been. A big part of this has been soaring house prices, which have held people back from buying, while for others, living with friends in a desirable location has outweighed the drive to buy a property.

Rents rise but tenants stay put

For buy-to-let landlords, keeping void periods to a minimum is an important strategy for maximising yields. This can mean encouraging tenants to stay in the property for as long as possible by being communicative, fair and quick to deal with any issues, as well as having a strong property to advertise when tenants do move out.

According to Goodlord, the average void period in the UK (the period of time between tenancies/before a new tenancy when the property sits vacant) was 19 days in April, which is exactly the same as it was in April 2023.

Part of the reason for this could be that with rising rents and a shortage of supply in some areas, tenants are more likely to stay put in their existing properties. Due to buying homes later in life, many tenants could also view their rental homes as a more long-term option.

As Goodlord points out, void periods have remained relatively close to their year-on-year averages in recent times, which is good news for landlords in terms of predictability and consistency, alongside strong rents.

Market is stabilising