Rental costs for newly let properties in the United Kingdom have increased by 3.9% over the past year, marking the slowest rate of growth since August 2021. Despite this deceleration, the average cost of renting a newly let home is now £3,240 higher than in the period following the pandemic lockdowns. This surge represents a significant 27% rise in rental prices since 2021, with the annual cost of renting a property climbing from £12,000 to £15,240.
Demand for rental homes has surged dramatically, driven by a robust labour market and the escalating costs associated with homeownership. The number of rented homes has not expanded since 2016, contributing to the scarcity of rental properties.
“The number of rented homes hasn’t grown since 2016, creating scarcity for renters at a time when demand has boomed on a strong labour market and the rising cost of home ownership.” – Richard Donnell
Current trends indicate that average rental costs in the UK are projected to rise by another 4% by 2025. However, this increase will not be uniform across the country. While London and other large cities might witness smaller increments, more affordable regions are anticipated to experience more substantial percentage rises. Notably, Northern Ireland has seen rents jump by 10.5%, and the north-east of England has recorded an 8.7% increase. In contrast, London's rental growth has slowed significantly, with an annual increase of only 1.3%, down from 8.7% the previous year.
The supply-demand imbalance in the rental market is beginning to show signs of narrowing. However, according to Richard Donnell, the ongoing scarcity of rental properties is expected to maintain upward pressure on rents.
“Rental growth has slowed but we expect an ongoing lack of rental supply to keep an upward pressure on rents.” – Richard Donnell
To alleviate the pressure on renters, experts suggest that increasing the supply of rental properties is crucial.
“Quickest way to ease the pressure on renters” – Richard Donnell