Growth in the UK rental market

August 11, 2023

Across the UK rental market, tenant demand continues to surge, which is pushing rents up further and helping landlords mitigate higher costs for buy-to-let mortgages.

Competition among tenants is growing in intensity as demand increases across the UK rental market. This is happening as there has also been a steady increase in prospective tenants looking for rental homes paired with a lower supply of available rental stock on the market.

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Growing demand in the rental market

According to the latest Housing Insight Report by Propertymark, the number of properties available to rent is 19% lower than last year. And the number of new prospective tenants registering per member branch has risen by 27%. There has also been a 57% increase in the mismatch between supply and demand between June 2022 and June 2023.

Additional data from Rightmove commissioned by the BBC revealed that there are an average of 20 requests from prospective tenants to view each property available to rent in Britain. The North West of England is seeing the strongest tenant demand with an average of 30 viewing requests per rental property.

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Rising rents as void periods drop

The current mismatch between supply and demand is continuing to put upwards pressure on rents and causing void periods for landlords to drop. In some cases, prospective tenants are offering more than asking rent in order to secure a property quickly and are putting time and effort in to get to the front of the rental queue.

Official figures show rent is rising at its fastest annual rate since comparable records began in 2016. In England, the average rent paid sits at £960 per month, according to figures from the Office for National Statistics.

Data from Goodlord also shows that rents on completed tenancies are at an all-time high in England after a 19% month-on-month rise throughout July and a 10% increase year-on-year. Last month rents increased in every single region monitored by the lettings platform’s index. The North West led the way once again with a 48% rise in rental prices.

William Reeve, CEO of Goodlord, comments: “This month’s numbers are quite staggering. In July we do usually expect to see an increase in rents and a reduction in voids - and all indicators pointed to a particularly red hot summer for the rental market, if not the weather. So while the 10% year-on-year increase is a big shift, the sharp drop in void periods is also particularly surprising.

“Traditionally, rental costs continue to increase until September before cooling off in the autumn, which could mean these aren’t the last records we’ll see broken before the year is out.”

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Mitigating higher costs for buy-to-let mortgages

At the same time, landlords have been hit with higher costs, including rising mortgage rates. The Bank of England increased the base interest rate by 0.25% to 5.25% on 3 August. This was the 14th consecutive increase to the base rate, which now sits at a 15-year high.

Inflation levels are impacting the Bank of England’s decisions on where the base interest rate should be. The rate of inflation in the UK currently sits at 7.9%, and that, along with interest rates, are expected to drop later in the year.

So, while buy-to-let mortgage rates are higher than a year ago, rents are higher and tenant demand remains strong, particularly with the substantial supply and demand imbalance across the UK. And this is not expected to change anytime soon, allowing landlords to mitigate higher costs for mortgages and showing the growth and opportunities within the buy-to-let market.

At The Prestbury Advisory, our team of experts can provide you with knowledge and advice on the UK property market, whether or not you’re buying with a mortgage. If you want to speak to us about your next property investment opportunity, email us at contact@theprestburyadvisory.com, or give us a call on 01625 725 779.

Growth in the UK rental market

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