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Private rents in the UK are continuing to soar

While house prices across many areas of the UK are stagnating or falling, private rents continue to reach record highs, amid intense competition between tenants for rental properties.

 

Record high rents and demand across multiple areas of the UK


According Rightmove's Rental Trends Report for Q3 2023:

  1. Average advertised rents outside London have hit a new national record for the 15th consecutive quarter, and are now 10% higher than a year ago at £1,278 per calendar month (pcm).

  2. Average London rents have also risen to a record of £2,627 pcm, now 12.1% higher than last year.

  3. The number of enquiries each property is receiving from would-be tenants has more than tripled to 25 from eight at this time in 2019.

  4. This is driven by the ongoing imbalance between supply and demand, with 41% more tenants looking to move than in 2019 and available supply down by 35%

  5. The supply and demand imbalance is slowly improving from last year, with demand easing by 17% compared with 2022, while available supply is up by 14% over the same period. The number of new rental properties coming to market is now 7% higher than at this time last year, the biggest yearly jump since November 2022.

 

A continuing trend


That the growth in rents is a continuing trend is demonstrated by reference to to Rightmove's same report from Q2 2022, which flagged that average advertised rent in Greater London had increased 16.1% in the 12 months to Q2022, the highest recorded annual rate increase of any region, and that average rent outside London had hit a new record of 17% growth in two years, with the below

increases in annual rental rates:

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Source: Rightmove Rental Report Q3 2023.
  • Manchester - 23.4%

  • Cardiff - 19.6%

  • Liverpool - 19.4%

  • Edinburgh - 18%

  • Birmingham - 16.1%

Homes are continuing to let at speed, with the average property being let within 17 days of coming on the market.

 

Which factors lie behind the trend?

  1. Supply / demand: Demand for rental properties continues to greatly outstrip supply, resulting in intense competition between tenants. The average rental property across Great Britain is currently receiving 25 enquiries from prospective tenants to letting agents, which is more than triple the eight on average they were receiving in pre-pandemic 2019.

  2. Inflationary pressures: The well-publicised increases in bank lending rates and broader inflationary pressures in the wider economy have in some cases led to landlords with mortgages passing these costs onto tenants.

  3. Interest rates: The increasing borrowing costs have in many cases also led to would-be-buyers electing to rent for a year or two longer, in the hope that interest rates cool and housing becomes more affordable.

  4. Exiting landlords: As we reported in September, landlords face multiple market challenges, leading some to sell up and decrease the availability of rental stock (https://www.oxstonegroup.com/post/the-rise-of-the-uk-holiday-let), with landlords most concerned about government sentiment towards the industry (47%), rising taxation (41%) and increasing compliance requirements (33%). A material 16% of properties currently for sale were previously on the rental market, up from 13% in January 2019 (Source: Rightmove Rental Trends Report Q2 2023).

  5. Returns to cities / overseas students: Returns to city living following the end of the pandemic years and increasing numbers of overseas students entering UK universities to study have increased demand. Sponsored study visas for higher education students grew by 23% compared to year ending June 2022 and was up 108.4% compared to the year ending June 2019 (https://www.universitiesuk.ac.uk/universities-uk-international/explore-uuki/international-student-recruitment/international-student-recruitment-data#:~:text=In%202021%2D22%20there%20were,98%2C398%20Graduate%20route%20visas%20granted.)


The views of lettings agents

Invest in UK property
Source: Rightmove Rental Report Q3 2023.

Rightmove quotes Ria Laitmer, Lettings Manager at Clarkes in Dorset, who said: “The gap between high demand and a severe shortage of rental stock at the moment is just crazy. We’re receiving mounting enquiries for each property to rent from would-be tenants, with queues of tenants arriving to open-house viewings and the majority being left disappointed - there are just not enough properties on the market

to meet the demand.”


In 2022, Tim Bannister, Rightmove’s director of property science, stated that “There are simply not enough homes available to rent to meet the demand from people inquiring,” with studio flats having overtaken one-bedroom properties as the most in-demand flat type for renters. Competition between tenants for available studios was 71% higher in 2022 than in 2021, with four times as many tenants looking for a studio flat as there were studios available.


UK property agent
Q3 2023 Rental Price Tracker by region. Source: Rightmove.

However, there may be a sliver of light at the end of the tunnel for renters. "Record rents and far more tenants looking to move than there are homes available means it will still feel very difficult for many tenants navigating the market. However, there are signs that some of the pressure between supply and demand is beginning to ease, with the number of new rental properties coming to the market now at its highest level since the end of last year. While it is likely that there is some way to go before this filters through to rental prices, if the improving trend between supply and demand continues, we could start to see the pace of yearly rent rises slow more significantly than it has been.” (Tim Bannister, Q3 2023).


Summary


Against a backdrop of high interest rates, landlords who have agreed lengthy fixed rates, or who are in a position to buy in cash, can expect to achieve healthy rates of return. In addition, the recent stagnation and fall of house prices in the UK presents an interesting dynamic and potentially lucrative investment opportunity, in particular for cash purchasers.


 

About Oxstone


Oxstone is a market-leading UK property sourcing company and purchaser's agency. We leverage the latest AI-enabled property sourcing and investment analysis software and our strong network of connections across the UK to source, analyse and secure excellent residential and investment properties for our clients, including off-market properties that are not available to the general public.


We also offer our clients deep market expertise, superior transaction management throughout the buying process and connections to recommended service providers. Our expert guidance through each step of the buying process ensures our clients are among the best placed in the market to succeed in their relocations or investments.





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