Is the rental market running hot or cold, and what trends can we expect in the coming year? Understanding the rental market dynamics is crucial for both tenants and landlords. Let’s explore the latest data from the Office of National Statistics (ONS) and property portal Zoopla to get a clearer picture of the rental market today.
Taking Stock of the Rental Market
Unless you spent 2023 under a rock, you’ll be aware that rents rose significantly last year. A mix of higher interest rates, which put pressure on buy-to-let (BTL) mortgages, and high inflation drove these increases. But just how much did rents actually rise?
According to the latest ONS data, rents in the UK grew by 8.6% in the year to July 2024. Breaking it down further, the average monthly rent rose to £1,319 in England, £965 in Scotland, and £748 in Wales. This data highlights the ongoing strength of the rental market, as landlords continue to adjust prices in response to economic pressures.
Looking Ahead: Trends in the Rental Market
A new report by Zoopla reveals that while rents are still rising, the rate of growth is slowing compared to the past three years. As Richard Donnell, Zoopla’s Executive Director, puts it, the rental market has shifted from “red-hot” to just “hot.”
Zoopla predicts that overall rents are on track to grow by 4% over 2024, reflecting a cooling in rental growth compared to recent years. This slower pace should be considered alongside other market changes, especially the outlook on interest rates.
For the first time in four years, the Bank of England cut interest rates in August 2024, and experts anticipate at least one more cut by the year’s end. Lenders have responded by lowering rates to stay competitive, with mid-August figures showing the average BTL rate for a two-year fixed deal at 5.41%, down from 7% in summer 2023. These lower rates could positively impact the rental market by encouraging further investment.
Demand in the Rental Market
Demand remains robust, with Zoopla noting an average of 17 tenants chasing each listed rental property. With demand consistently outstripping supply, the pressure on the rental market continues.
While the new Labour government has committed to accelerating the UK’s slow housebuilding pace, significant changes will take time. Large-scale residential developments face lengthy design, planning, and construction phases, meaning relief for the rental market won’t come quickly.
Outlook for Buy-to-Let Investors
For BTL investors who buy wisely and take their responsibilities seriously, the rental market offers opportunities for consistent income and capital growth. The key is to stay informed about market trends and adjust strategies accordingly.
Want to know more about the rental market? Contact us today for tailored advice and insights.
*Source: Report by Zoopla for the BBC, August 2024.
**Source: Moneyweek.
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