The UK rental market has been booming in recent months. Despite the government promoting incentives and lenders offering zero-deposit mortgages for first-time buyers, it is still very difficult for many people to step onto the property ladder due to high interest rates and the cost of living squeeze.
It isn’t just first-time buyers who have been affected, Landlords have also been scared off from investing in buy to let properties. Pending rule changes which are said to give renters more rights and high interest rates have led many to sell up. As such the supply of rental properties has dropped and demand has increased.
However, there are plenty of opportunities for landlords. Higher interest rates mean that mortgages are still out of reach for many buyers, and this has led to a boom in the rental market. Zoopla reports that rents have risen by up to 10.3% since September 2022 and tenants are paying an average of £11,164 per month.
The Current State of the UK Rental Market
The rental market in the UK is currently experiencing an imbalance in the number of available properties and rental demand. Research by the property portal also found that while the number of renters moving out was quite low at 5.5%, average annual rents had risen by £1,300 to almost £14,000 in the past year alone.
This represents an opportunity for landlords and property professionals in the rental market as demand outweighs the supply. It is said that the demand for rental homes is 51% above the 5-year average. September 2023 was the 19th consecutive month in which rental inflation was measured above 10%. This has also led to a jump in the number of cities with average rent prices above £1000. New additions to this list include Southampton, York, and Cardiff as high rents in the South East push demand into more affordable cities.
High Yields and Rising Rental Prices
Zoopla predicts that rental inflation will remain above 9% for the rest of this year and potentially drop to around 5-6% in 2024. Higher demand for rental properties continues to push prices up. The areas with the highest yields in the UK include the North East, with an average gross yield of 7.2%, and the Midlands. In fact, cities in the North now dominate the best places where landlords can get the highest yields. Topping the list is Sunderland, with an average yield of 8.39%, followed by Dundee, Burnley, Glasgow, and Middlesborough which all stand at above 7% on average.
In addition to this, higher mortgage rates, and increased levels of immigration groups such as students and working professionals since countries re-opened their borders post-Covid, have also contributed to the increase in rental demand.
One key takeaway from all this is that the rental market will remain particularly strong for the foreseeable future. Mortgage interest rates of over 5% mean that buying a home is beyond reach for many at the moment and makes renting the more affordable option. Landlords can benefit provided they’re invested in the right areas and although rental price rises are expected to slow down in 2024, the issues in the UK housing market will not be solved overnight.
BHW Solicitors is the leading residential property law firm in Leicestershire and is ranked in the top ten real estate firms in the East Midlands by the Legal 500 guide. We pride ourselves on giving our clients a seamless and efficient end-to-end conveyancing service and adhere to high-quality industry standards. We work with many estate agents and financial advisors as their preferred conveyancing partner. Due to our proactive approach to progressing our clients’ property transactions, we are constantly being referred time and time again. Whether you are a property professional, seller, or buyer, we can help with your residential conveyancing queries. To request a personal conveyancing quotation, or to discuss setting up a professional referral relationship with your business, please call us on +44 (0)116 289 7000 or send us an email at conveyancing@bhwsolicitors.com.
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