UK rental growth is witnessing an unprecedented surge, with a 12% year-on-year increase in rents, according to a recent report from estate agency Hamptons. This is the highest increase since Hamptons initiated its survey in 2014, with a median monthly rent now standing at £1,304 for newly let properties across the UK.
In addition, figures from Rightmove showed that the average rent rose to £1,278 per month outside London and an eyewatering £2,627 inside the capital.
Mortgage Rates Impact Rentals
Landlords face increasing financial pressures due to high mortgage rates, while demand from tenants continues to soar. This creates a supply-demand mismatch that has led to a spike in rental costs.
There may be good news on this front, however, as many of the major lenders have already unveiled better fixed-rate deals for both home purchases and remortgages in recent days following the hold on interest rates by the Bank of England in September. While it remains unclear what this may mean for the wider market, already Investec Bank has reduced rates across Buy To Let mortgages by 0.71%.
The End of No-Fault Evictions
Additionally, legislation is currently passing through Parliament that aims to ban unjust evictions of tenants. Although well-intentioned, this has led some landlords to exit the market, contributing to a smaller pool of available properties and driving rental costs up further.
In addition, Data for England also showed that the number of S.21 evictions (the type of which are going to be adjusted), was up 41% in 2023, as landlords perhaps prepared to leave the rental market.
A Demand Mismatch
For renters, the situation is dire. Last month’s official figures, which encompass both existing and new lettings, confirmed that the cost of renting is at its highest level since records began.
The fierce competition among tenants for available properties has led to an inflationary spiral in rents. On average, a potential renter is now competing with up to 25 other individuals for a property.
For landlords, of course, higher rents often translate into higher returns on investment. Although the pace of rental growth in the UK will likely level out over time, for many it has already yielded a higher return for landlords over the past year than the previous four combined.
Wider Market Trends
The overall UK property market remains incredibly dynamic. Data from Rightmove shows that although a third of properties have seen price reductions to attract buyers, the general asking price in September has risen slightly compared to the previous month. This suggests a market that is continually adjusting and offering new opportunities for buyers and sellers.
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