UK rental market sees slowing inflation amidst easing demand

Posted on Tuesday, April 16, 2024

The gap between demand and supply remains significant and continues to shape the market. 

The UK's rental market is experiencing a slowdown in inflation, according to recent data.

Nicky Stevenson, Managing Director of Fine & Country comments: “Rental growth has moderated to +7.5%, a decrease from +9.8% recorded a year ago. The cooling trend in rental inflation is evident across the UK, with London witnessing the most substantial deceleration.

"Despite a slight uptick of 0.9% in rents in March, based on Hometrack data, rental demand has diminished by a fifth over the past year. Contributing factors include the waning effects of the pandemic, a slowdown in the labour market, and enticing lower mortgage rates for first-time buyers, as reported by Zoopla."

Supply dynamics

In a positive turn, the supply of rental properties is on the rise. Propertymark’s latest Housing Insight Report reveals a 29% surge in available rental properties, marking an 18-month peak. Yet, the persistent demand-supply imbalance suggests that rental prices are likely to sustain their upward trajectory.

Prime markets

According to Stevenson, February saw a reduction in the average void period to 18 days from 22 days in January, marking an 18% decline. All UK regions, barring the South West, observed shorter void periods, as per Goodlord data.

She notes that since the pandemic, rents have escalated by an average of 29%, pushing a significant number of properties into higher price brackets. Currently, 51% of rented properties in the UK are located in areas where the average rent exceeds £1,000 per month – nearly double the figures from five years ago, according to Zoopla.

In the prime rental segment, the average rent stands at £3,950, reflecting a 2.1% year-on-year increase. The South West emerges as the frontrunner in prime rental growth, witnessing a robust 14.7% annual surge.

Stevenson says: “The evolving dynamics of the UK's rental market underscore the resilience and adaptability of the sector amidst changing economic landscapes. The moderation in rental growth, combined with a significant increase in supply, offers a glimmer of relief for tenants.

She concludes: "However, the persistent demand-supply imbalance remains a dominant force, ensuring that the upward pressure on rents persists. As the market continues to mature post-pandemic, we anticipate further adjustments to cater to evolving tenant needs and preferences."

Via @PropertyReporter