Edinburgh Leads the Way: UK Rental Growth Predictions for 2024

Zoopla's Bold Projections for 2024 Rental Market

In a comprehensive forecast for the private rental sector in 2024, Zoopla has provided insights that are bound to capture the attention of property investors. The year 2023 is set to close with rental growth surpassing 9 per cent, outpacing earnings growth projected at approximately 6 per cent. This notable disparity in favour of rental growth is primarily attributed to the impact of rising mortgage rates, pushing more individuals towards renting.

2024: A Year of Resilient Rental Growth

As we gaze towards 2024, Zoopla anticipates that rental rates for new tenancies will continue to outpace earnings growth, projected at 3.6 per cent. Ongoing supply constraints and the persistence of higher mortgage rates underpin this forecast. The implications for investors are significant, as rental growth remains an attractive avenue for investment returns.

Edinburgh Emerges as a Strong Contender

A standout prediction in Zoopla's report is the identification of regional cities as the impetus for rental growth. The rental inflation in inner London is expected to slow more rapidly, driven by higher rents and affordability constraints. This phenomenon is poised to halve the overall UK rate of rental growth, making the regional cities a focal point for investors.

Emerging Trends in the Rental Market

Zoopla also highlights trends that are likely to persist well into 2024. One of these trends is the response of renters to higher rents and limited supply. Forced to adapt, renters are considering smaller homes, exploring more affordable areas, and even sharing properties with others to manage costs. Data from the Resolution Foundation reveals a 16 per cent reduction in floor space per person for private renters over the last two decades.

Richard Donnell, Zoopla's research chief, suggests that increased levels of sharing could be a critical factor in sustaining rental growth above earnings levels across regional cities over the next 12 to 24 months.

City-Level Rental Growth Variations

Rental growth at the city-level showcases a spectrum of growth rates, from 6.0 per cent per annum in cities like Brighton and Exeter to an impressive 15.6 per cent in Edinburgh and 14 per cent in Manchester. While several cities are witnessing slower annual growth than the previous year, others are maintaining a similar growth trajectory.

Inner London: A Notable Slowdown

Notably, inner London is experiencing a significant slowdown, primarily due to rents moderating from a high base following the post-pandemic rebound.

The Road Ahead

While unaffordable rental costs are expected to temper demand and reduce growth, the persistent mismatch between supply and demand suggests that rental growth will slow down more gradually than anticipated.

In closing, Richard Donnell emphasises that maintaining low supply levels would necessitate a weaker labour market, reduced immigration, and declining mortgage rates to curtail demand and steer rental growth back towards the 5.0 per cent per annum mark.

In summary, Zoopla's 2024 rental market forecast underscores the appeal of UK property investment, with Edinburgh emerging as a standout destination for rental growth, promising opportunities for savvy investors looking to capitalise on this dynamic market.