Current State of the UK Rental Market

The demand for rental properties in the UK still remains higher than the average of the past five years however there has been a slight softening in demand more recently. Although there's an increase in available supply, the competition among renters continues to drive rental growth in 2024.

Rental Growth and Earnings Disparity

Recent data from Zoopla/Hometrack shows that UK rental growth was at 9.7% in October, outpacing earnings growth, which was at 7.9%. This growth rate has slightly slowed down from the 11.9% seen in 2022. Rental demand has decreased by 11% compared to last year's unprecedented levels, but it's still significantly higher, sitting at 32% above the five-year average. Despite this gradual improvement in the supply-demand balance, competition remains fierce. The number of enquiries for each property has more than tripled from eight to 25 since 2019, according to Rightmove. In such a competitive market, renters are finding themselves needing to be more flexible with their schedules and preferences, and they must be prepared to swiftly undergo referencing to enhance their chances of securing a property.

Evolving Dynamics

Looking ahead, while rents are expected to continue increasing steadily, the pace of growth has likely reached its peak. Evidence suggests a cooling in tenant demand due to affordability issues. Annual rental growth is forecasted to average 3.6% over the next five years. London is expected to lead this slowdown, with rents predicted to rise by just 2% this year, according to Hometrack/Zoopla. However, factors such as regulation and higher mortgage rates will continue to affect new investments in the rental market, maintaining the supply-demand imbalance that has fueled growth.

Anticipating Future Trends

In the prime market, average rents have reached £3,852, marking a 5.6% year-on-year increase. Rental growth in prime markets is above 2% in all regions, with the strongest growth seen in the South West, reaching 19% year-on-year.