UK Rental Market Hotspots and Forecast
With factors such as escalating property prices, limited wage growth and higher mortgage repayments as a result of rising interest rates; an increasing number of people have opted for rental properties as a more financially feasible option during the cost-of-living crisis.
This shift has seen the UK’s rental market go from strength to strength, particularly throughout the last twelve months. Average rental prices have reached new record highs across the UK and this upward trajectory is expected to continue throughout 2024 at a more moderate pace.
For landlords, the UK’s growing rental market offers the potential for steady rental income, capital appreciation of properties, and opportunities for further property investment – providing long term financial stability.
Here, we take a look at several areas of the UK and how regional rental markets fared against the previous quarter and year.
Growth in the UK’s Rental Market
A chronic mismatch between supply and demand has been the defining feature of the UK’s private rental sector for the last couple of years, with the number of tenants enquiring about available rental properties increasing significantly across the UK as a result.
Data released by the National Residential Landlords Association (NRLA) revealed that, during the last quarter of 2023, 71% of landlords reported an increase in demand from tenants. This represented a substantial increase when compared to the 65% of landlords reporting the same at the end of 2022 and the 22% of landlords in the final quarter of 2019, when the UK’s rental market was more balanced. This is reinforced by Rightmove’s Rental Tracker, which reported that estate agents were receiving, on average, 11 enquiries per property – up from just 4 per property in 2019.
The average rental price outside of London reached a record £1,280 pcm and £2,631 pcm in Greater London at the end of 2023, representing a 9.2% increase and 6.1% respectively from the previous year. This is the 16th consecutive record in newly advertised rental prices, with this growth predicted to slow to a more moderate percentage as we began the new year.
Despite slightly lower levels of growth in the last month or two, the rental market is still very busy compared to pre-pandemic levels. Landlords are still achieving average rental yields of 6.4% – up from 5.9% from the previous year and currently at the highest level since Rightmove records began.
UK Rental Market Hotspots
For landlords, it is important to analyse tenant demand levels as well as market statistics when establishing whether renting out your property is a viable option with a good return.
Analysis of Rightmove’s rental tracker as well as areas where landlords has reported the biggest increases in tenant demand indicate that the follow regions are hotspots for landlords looking to achieve a good return on their property.
WEST MIDLANDS
A survey conducted by the research consultancy BVA-BDRC, revealed that 76% of landlords in the West Midlands found that demand for their rental properties was still rapidly rising – the highest percentage of those surveyed across the UK.
According to Rightmove’s latest rental tracker, the West Midlands saw one of the highest quarter-on-quarter increases in the UK with 1% – seeing average rents reaching £1,143 per month. This equates to a 10.6% year-on-year change – one of the highest in the UK, second only to the North West – as well as giving an average rental yield of 6.5%.
Coventry, in particular, has been named one of the top rental price hotspots with an annual change of 24.9%.
The likes of Coventry and Birmingham – the UK’s second city – owe their thriving rental markets to its comparatively young population and abundance of students looking to rent long-term.
SOUTH EAST
The BVA BDRC data highlighted the South East as another hotspot for landlords, with 74% of landlords reporting increasing tenant demand in the region.
Similarly, Rightmove’s Rental Price Tracker reveals that despite a 0.8% decrease between Q3 and Q4 as the market began to stabilise, rental prices in the South East had an overall year-on-year price increase of 7.5% and an average rental yield of 5.7%, giving a slightly better return than London’s 5.4% average rental yield.
With towns such as Bracknell and Slough still benefitting from close proximity to London and an abundance of regeneration in the area, both demand for rental properties in these commuter towns and average rental yields are likely to remain high in the coming year.
WALES
With three quarters of landlords surveyed reporting increasing tenant demand, Wales comes in as one of the top three rental market hotspots in the UK. Again, Rightmove rental tracker data reiterates the value of the area for landlords, showing the average rental yield as 7.1% – one of the highest in the UK.
Both quarter-on-quarter and year-on-year changes increased by 1% and 8.1% respectively, with expert predictions indicating that both demand and rental growth will remain positive.
UK Rental Market Forecast
Rightmove recorded an 7% increase in the number of rental properties coming onto the market compared to last year and this has contributed to the steadying of rental price growth in recent months as the disparity between supply of rental properties and demand from tenants begins to improve.
Many experts remain positive that the UK’s rental market will continue to experience growth, albeit a slightly slower growth than that of 2023.
Rightmove predicts average rents will rise by 5% outside of London throughout 2024 and 3% in London as the supply and demand become more aligned.
Similarly, JJL forecasts the UK rental market to experience 5% growth throughout 2024 before slowing to a more modest growth. However, the overall consensus is that rental growth will continue to thrive, increasing cumulatively by 23% and representing a great opportunity for landlords to benefit from short-term gains and long-term stability.
Similarly, Savills predicts 6% rental growth in the UK for the coming year and 18.1% over the next four years, whilst London is predicted to experience a 5.5% increase in 2024.
As a landlord, rental yields are a key focus and essential for covering costs of letting and maintaining a buy-to-let property. There are several things you can do to help maximise your rental yield and retain quality tenants to take advantage of strong growth in the rental market. Read our top tips for maximising your rental income, here.
Regulatory Changes
The Renter’s Reform Bill is set to change the UK rental market once it has passed through Parliament, changing the rental landscape for both tenants and landlord alike.
Our overall summary of what the Renter’s Reform could mean for landlords will provide a brief overview of what to expect, but it is important to keep an eye out for updates to the Bill.
Adapting to these evolving rules and regulations will be essential for landlords across the rental sector as the Bill continues its journey through parliament. Our team are happy to assist you in getting to grips with policy changes.
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