UK Rental Market Report – September 2024: Key Insights and Trends
As we move through September 2024, the UK rental market continues to navigate a landscape marked by evolving dynamics and shifting trends. Here’s a snapshot of the current state of the rental market, highlighting the most significant insights:
Key Insights
- Annual Rental Inflation: Rental inflation for new lets across the UK has eased to 5.4%, down from 10.2% a year ago. This marks the slowest pace of rental inflation in nearly three years, indicating a gradual deceleration in rent increases.
- High Demand: The demand for rental properties remains exceptionally high, with enquiries per rented home more than double the levels seen before the pandemic. This sustained demand is a testament to the continued challenges in home ownership affordability.
- Regional Hotspots: Six postal areas in the UK are experiencing rental inflation of 10% or more. These areas are seeing substantial rent increases, reflecting localised supply and demand imbalances.
Cardiff’s Rental Trends:
Annual Rent Increase: Cardiff’s rent growth of 6.5% highlights a strong demand for rental properties in the city, contributing to higher average rents.
Average Rent: With an average rent of £1,096, Cardiff remains an attractive yet competitive market for renters, influenced by various factors including supply constraints and local economic conditions.
Market Dynamics
Slowing Inflation but Persistent Pressure
While the overall rental inflation has slowed, the discrepancy between supply and demand keeps upward pressure on rents, particularly in more affordable areas. Larger cities are seeing slower growth due to affordability constraints, with adjacent markets absorbing some of the demand.
Impact of Supply and Policy
The rental market has faced a persistent shortage of supply over the past three years. Although the number of homes for rent has increased by 18% year-on-year, it remains 24% below pre-pandemic levels. This scarcity is exacerbated by a steady flow of landlords selling properties, influenced by potential tax changes. Any further reduction in rental supply could continue to drive up rents, hitting low-income renters the hardest.
Demand Trends
Demand for rental properties remains strong, though it has cooled slightly from its peak. The surge in demand post-pandemic, coupled with rising mortgage rates, has kept many potential buyers in the rental market, further straining supply.
New Lets vs. Existing Tenancies
The Zoopla rental index, which tracks rents for new lets, reflects the current rental inflation trends more accurately than the ONS index, which includes existing tenancies. While new let rents have seen a slowdown, many renters in existing tenancies are only just beginning to experience the effects of higher rents from the past few years.
Outlook for the Rest of 2024
Looking ahead, we anticipate that rental inflation will moderate further to a range of 3-4% by the end of 2024. The slowdown will be led by weaker rental growth in cities, though there is potential for above-average growth in the larger rental market outside urban areas. The drawn-out nature of this slowdown is attributed to ongoing supply constraints and varying regional dynamics.
Policy and tax changes will likely continue to influence the rental market, with some landlords potentially exiting the market, thereby maintaining supply constraints. This will keep upward pressure on rents into 2025, reinforcing the need for expanded rental housing stock to address affordability issues.
For more updates and detailed analysis on the rental market please contact a member of our team
