Lettings Market Update

Lettings Market Update

As a landlord, you need to know if the market has a sound footing. For future investing, it’s vital to get insight into the potential opportunity. We share the key facts from across the UK.

Demand/supply imbalance means a continued rise in rents

  • The stock of homes available to rent has fallen by 46% vs the 5 year average and the undersupply means rents are likely to continue to rise into 2023.
  • The shortage of stock has seen annual rental value increase by 12.3% over the last 12 months, compared to less than 2% in July 2021.
  • Urban demand outpaces that in rural areas due to strong employment growth and new build supply around city centres.

The upward rise in demand and the lack of rental supply has seen rents increasing at the fastest rate in years. London has seen rental value growth continue to gather pace, but this is due to the exceptional circumstances generated by the pandemic and isn’t expected to be sustained at the current growth rates.

12.3%* UK annual rental growth sees rents average £1,051

12.3%* UK annual rental growth sees rents average £1,051

Market circumstances mean that it could be an opportune time to be a landlord. Could you be earning more from your property?

A £115 rise in the average monthly rent across the UK (including London) highlights what has been a sustained upward trend, with average rental values reaching new record highs. This is the result of the continued surge in demand coupled with a chronic reduction in supply. The impact is being felt far and wide across the UK, albeit with contrasting regional variations and also in London due to an element of ‘catch-up’ after large falls during lockdown; Scotland as a whole has a lower rental growth rate than the UK average but Edinburgh reflects the overall UK picture in percentage terms and Glasgow is even higher at 14.4%.

10.0%

Rental value increase in Scotland

12.3%

Rental value increase in Wales

11.3%

Rental value increase in the East Midlands

12.2%

Rental value increase in the North West

Affordability insight shows there is still scope for rental growth

Affordability insight shows there is still scope for rental growth

Although rent increases may be reaching a plateau, there is still head-room for growth in certain market segments.

How much further rents can grow depends on affordability – and this can vary dramatically between different sections of the population. The private rented sector deals with a wide variety of demographics from the more affluent to those on housing benefits. However, overall 75% of renters said they found rental bills easy to pay still. This would indicate that there is still significant scope for rents to grow further.

72%

Find rental payments easy - South

85%

Find rental payments easy - North

87%

Find rental payments easy – Highest income

68%

Find rental payments easy – Lowest income

Rising costs are impacting the demand for certain properties

Rising costs are impacting the demand for certain properties

Tenants are changing their property priorities to help manage the impact of inflation and energy bill increases

With tenants facing financial pressure across several fronts – including rising rents, inflation and energy bills, there has been a marked shift in their behaviour when it comes to the consideration of the type of properties that they are looking to rent. Over 2022, renters have been turning more towards 1 and 2 bed flats and away from 2 and 3 bed houses, with the trend accelerating more over recent weeks.

Part of the shift is also due to changes in supply, with fewer properties available than needed to meet demand, but the over-riding reason is one of cost management and affordability. A 2 bed flat is on average £105 a month cheaper to rent than a 3 bed house, a £1,260 difference over 12 months. The lower cost of energy for smaller homes is also a major consideration as we enter a period of escalating energy bills.

40%

Less gas needed to heat a purpose built flat vs 3 bed terrace

48%

Less gas needed to run a C rated home vs an E rated home

34.4%

Rent as a percentage of average earnings

We're here to help

If you are a landlord looking to improve your rental yield, or you would like to find out more about your property’s rental value:

Statistics from the Zoopla Rental Market Report September 2022 except where otherwise stated.
*Countrywide average rental value for new lets Jan-Apr 22 compared to Jan-Apr 21.