According to insights shared by Nicky Stevenson, the Managing Director of Fine & Country, the momentum of the UK rental market remains unwavering, as the yearly upswing in rental property values persists and gains further traction, particularly during the bustling summer season. The demand for rental accommodations continues to outstrip the available supply by a significant margin, resulting in heightened competition and stretched affordability for prospective tenants.
Stevenson reveals that within the prime real estate sector, average rental rates have witnessed an impressive 11% year-on-year surge, barring slight decreases in the North East and South East regions. Data from Rightmove underscores a striking 162% surge in demand per rental property compared to levels recorded in May 2019. This fervent demand has translated into fierce competition, with over a quarter of properties being leased above their initially listed prices.
As rental costs have outpaced average earnings over the past 21 months, affordability has emerged as a notable challenge. According to Zoopla, a significant 15% of renters now find it considerably arduous to meet their rental payments, marking a substantial increase from the 10% reported in the preceding November. Consequently, renters are expanding their search horizons, as evidenced by a 50 km² enlargement in rental search areas on Rightmove.
Stevenson underscores that the persistent disequilibrium between supply and demand is likely to sustain pressure on rental property values. Nonetheless, she posits that the deceleration in the sales market could offer some respite. A reduced number of landlords are opting to sell their properties, choosing instead to lease them while awaiting potential fluctuations in prices to subside. This strategic shift might marginally augment the rental property inventory. Although a portion of landlords are exiting the sector, Zoopla’s data indicates that this trend has been unfolding since 2018 without acceleration.
In spite of the hurdles, the rental sector remains a robust medium-to-long-term investment opportunity. The Royal Institution of Chartered Surveyors foresees a yearly rental growth rate of 6% over the ensuing five years. Notably, more than a quarter of landlords with holdings of five or more properties have intentions to diversify their portfolios in the upcoming year, a testament to their confidence in the latent potential of the rental market.
The UK’s rental market persists in its flourishing state, offering avenues for landlords and tenants alike to prosper. Staying well-informed and making judicious decisions will enable individuals to reap the rewards of this sector’s steady expansion and enduring resilience.