According to Nicky Stevenson, Managing Director of Fine & Country, the UK rental market shows no signs of slowing down, with annual growth in rental values continuing to rise, especially during the busy summer months. Demand for rental properties remains significantly higher than the available supply, leading to increased competition and stretched affordability for renters.
Stevenson reveals that in the prime market, average rents have seen an impressive 11% year-on-year increase, with the exception of the North East and South East regions, where the average monthly rental prices have slightly decreased. Rightmove data indicates that demand per rental property is a remarkable 162% higher compared to May 2019 levels, resulting in fierce competition and over a quarter of properties being let above their listing price.
As rents have outpaced average earnings for the past 21 months, affordability has become a challenge. Zoopla reports that 15% of renters find it very difficult to pay their rent, representing a significant increase from 10% in November of the previous year. Consequently, renters are expanding their search areas, as evidenced by a 50 km² increase in rental search areas on Rightmove.
Stevenson emphasizes that the persistent supply-demand imbalance will likely continue to exert pressure on rental values. However, she suggests that the slowdown in the sales market may provide some relief. With fewer landlords selling their properties and instead choosing to rent them out while waiting for potential price falls to pass, there could be a marginal increase in rental stock. Although some landlords are leaving the sector, Zoopla reports that this trend has been ongoing since 2018 and is not accelerating.
Despite the challenges, the rental sector remains a robust medium-to-long-term investment. The Royal Institution of Chartered Surveyors predicts rental growth of 6% per annum over the next five years. In fact, more than one in four landlords with over five properties are planning to expand their portfolios in the coming year, demonstrating their confidence in the rental market's potential.
The UK rental market continues to thrive, offering opportunities for both landlords and renters alike. Stay informed and make strategic decisions to benefit from the steady growth and resilience of this sector.