While house price growth has slowed or stopped in many parts of the country, it is a very different picture for the UK rental market, as demand for homes remains sky-high.
Buy-to-let landlords in the UK rental sector are continuing to experience extremely strong levels of appetite for their homes from tenants, and this has been the case for a number of years now. In this sense, not much has changed over the past year, with the gap between demand and supply still ongoing.
However, the result of this ongoing imbalance, which is more prominent in some areas than others, is that prices are inevitably being pushed up in the UK rental market. In most cases, there are far more prospective tenants registered with letting agents than the number of available homes listed, and this can lead to price wars.
Many landlords have also reported increasing their asking prices in response to their mortgage costs rising, which is an issue facing thousands of homeowners as well at the moment due to higher mortgage rates. In recent months, rates have been falling, but they remain more expensive than the historic lows pre-2023.
Yields have also increased for landlords, as rental values have gone up even while property prices have stalled. However, the latest figures show that capital appreciation is likely to return in the near future, with predictions of the biggest price rises to continue to be seen in the north of England.
Where have UK rental prices risen the most?
The latest research from Goodlord has revealed how the UK rental market has changed over the past year in terms of prices, with the average monthly rent in England now standing at £1,154 per month. This is 7% higher than it was a year ago, with the average price in January 2023 being £1,076.
On a monthly basis, this is a 1% price hike from December’s figures. However, it is important to note that, as is always the case, the various pockets of the country will see very different performances in terms of rent rises, largely based upon supply and demand.
For example, demand for rental homes in the north west has sky-rocketed, leading to the biggest annual price hike of any region in the UK. Rents have risen by 9% over the past year in the north west.
The north west has many “pockets” in itself, with very varied housing markets. The major cities of Manchester and Liverpool, for example, are extremely popular places for landlords to invest, with their strong rental markets and future potential through investment and regeneration.
Areas beyond the main cities, such as Stockport, Preston, Bolton and Salford, have also shown a high level of resilience in terms of both property prices and their rental markets, with all these areas being particularly popular with renters.
At the other end of the scale, the East Midlands saw the lowest annual jump in rental prices, which increased by 5.5% between January 2023 and January 2024 according to Goodlord.
Looking at London, the capital actually experienced the biggest increase in rents for January month-on-month compared to the rest of the UK rental market, rising by 2% in January. The average rental home in London now costs £1,968.
Unsurprisingly, this makes London by far the priciest place in England to rent, even though the current average rental cost is actually lower than its record-high of last summer of just over £2,000, says Gooflord.
What else has changed in the past year?
Another important marker that can show the health of the UK rental market is void periods, which are the length of time that a property sits empty in between tenancies, or before being tenanted. In general, the faster property gets snapped up, the greater the appetite for that property type in that area.
In January this year, Goodlord registered that the average void period in the UK rental space was 22 days. While this was slightly longer than December’s figure of 20, it is down compared with January last year, when the average void period was 23 days.
Needless to say, this figure remains fairly unchanged overall, indicating no major shift in the market.
William Reeve, CEO at Goodlord, said: “We don’t expect to see huge market movements in January; the pace of new tenancies tends to take a few weeks to pick up post-Christmas. So to see this uptick in month-on-month rents – as well as the consistently sizeable year-on-year rises – is a sign that the market isn’t cooling down anytime soon.
“In addition, with a new burst of activity on the sales side of the housing market, we could start to see some interesting knock-off effects on the lettings side in the coming months which could bring additional turbulence.”