The UK rental housing market saw record high demand from 2022 to early 2023, but it is currently progressively dropping. Demand is still higher now than it was before the outbreak, though. The most significant trends and the 2024 prediction are listed below:
Market Overview
Demand Moderation
The increase in demand for rentals that occurred in early 2022 is slowly returning to normal in the first quarter of 2023. While it has decreased somewhat, it is still greater than the rate prior to the occurrence of COVID-19.
Supply Adjustments
The stock of rental properties is gradually easing after being very constrained. But the number of homes to rent is still far below what could be considered adequate in relation to demand. This small rise in supply is likely to reduce the trend that characterized the years prior to 2019 of sharply escalating rent costs.
Affordability Concerns
Another factor that has had an influence on rental prices is affordability. It appears that rents have finally peaked and, taking into consideration the stagnated growth of wages up through 2024, should start coming down shortly. These measures have resulted in a slowdown in wage growth. This pressure is putting more pressure on rent increases.
New Trends
Is there a way through which renters can benefit from the landlord’s predicament? New data now obtained from Zoopla shows that, for the first time in five years, the percentage of rental properties recording a 5% or more rent drop is higher. Further, as extended from the Office for National Statistics (ONS) data, one can see that rental growth is not increasing anymore but is in a stagnation stage.
Areas in London with the Highest Rental Growth
| Area | Percentage Increase in Rents |
|---|---|
| Hackney | +8.2% |
| Tower Hamlets | +7.9% |
| Waltham Forest | +7.5% |
| Brent | +7.3% |
| Southwark | +7.1% |
Analysis: Areas in London with the Highest Rental Growth
- Hackney: Leading the charge in rental growth, Hackney continues to be a highly desirable location due to its vibrant cultural scene and proximity to central London.
- Tower Hamlets: Benefiting from extensive development projects and improved transport links, rents have surged significantly in this area.
- Waltham Forest: Its mix of historic charm and modern amenities keeps rents stable with a modest increase.
- Brent: With its diverse community and ongoing regeneration projects, Brent has experienced notable rental growth.
- Southwark: Known for its riverside attractions and cultural landmarks, Southwark remains a sought-after area, contributing to the rise in rents.
Key ideas
In the UK, the average rent for private rental housing increased by 8.9% in the year ending in April 2024 (provisional) and by 9.2% in the year ending in March 2024.
Up until April 2024, the average rent in England was £1,293 (8.9% yr), in Wales £730 (8.2% yr), and in Scotland £952 (10.0% yr).
For instance, the average rent in Northern Ireland increased by 10.4% in the 12 months leading up to February 2024, more than double the current amount.
In the 12 months preceding April 2024, London’s rent inflation rate led the rest of England at 10.8%, while the North East’s was at its lowest point at 5.8%.
Kensington and Chelsea had the highest average rent (£3,356) and the lowest.
Areas in London with Falling Rents
| Area | Percentage Change in Asking Rents |
|---|---|
| Westminster | -3.2% |
| Camden | -2.8% |
| Kensington & Chelsea | -2.5% |
| Hammersmith & Fulham | -1.9% |
| Islington | -1.5% |
Analysis: Areas in London with Falling Rents
- Westminster: The decline in asking rents in Westminster could be attributed to an oversupply of luxury apartments and reduced demand from international renters.
- Camden: Rental prices in Camden have seen a decrease due to changes in tenant preferences, with some renters opting for suburban locations offering more space.
- Kensington & Chelsea: Known for high property prices, Kensington & Chelsea have experienced a slight decline in rents as tenants seek more affordable options.
- Hammersmith & Fulham: The decrease in rents here might reflect broader economic conditions and the shifting desirability of certain neighborhoods.
- Islington: While still a popular area, the competition from newer developments in nearby areas has contributed to the reduction in asking rents.
Average Rent by Borough in London
| Borough | Average Rent (£) | Percentage Change in Last 12 Months |
|---|---|---|
| Barking & Dagenham | 1,100 | +3.5% |
| Croydon | 1,250 | +3.9% |
| Greenwich | 1,550 | +3.4% |
| Hackney | 2,000 | +5.8% |
| Westminster | 2,600 | +3.9% |
Analysis: Average Rent by Borough in London
- Barking & Dagenham: The most affordable borough, with moderate rent increases reflecting steady demand.
- Croydon: Offers more space and affordability, attracting families and remote workers.
- Greenwich: Its mix of historic charm and modern amenities keeps rents stable with a modest increase.
- Hackney: High rental growth driven by its cultural appeal and proximity to the city center.
- Westminster: The most expensive, with rents stabilizing in this central, high-demand area
Rental Growth Trends
UK Rental Market: These are due to the fact that rental growth in the region’s largest cities has started slowing down across the UK. Thus, the rental hikes are still in double digits in many areas; however, these figures depict a relative decline as compared to the figures of the previous year. Rental raises should carry on with a deceleration through 2024.
London and Prime London
In London alone, the growth in lettings has been checked. The rental price also grew faster, and according to the official statistics, it reached the highest level of 6.9% in November; this was a slight downturn from the previous figure of 6.8% in December. In prime central London, the rental increase rose as high as in September 2022 of this year, after which it has been gradually declining to a growth rate of 4% in Q4 2023. For the first time since March last year, prime rents fell in December, which was caused by lockdowns. However, there is an element of truth in the information, as the prime rents in London are still 17% higher than the level at the beginning of the pandemic in March 2020.
Segment Analysis
Smaller flats are currently seeing bigger rent increases compared to houses. This is likely because more people are looking for affordable rental options, and smaller flats fit that need. Meanwhile, there are more houses available for rent now. This is happening because some property owners are renting out their homes while they wait for the housing market to recover. Once the market improves, these houses might be sold instead of rented.
Forecasts
Looking ahead to 2024, rental prices in prime London are expected to rise, but not as quickly as in the past two years. The growth will be more moderate, reflecting a cooling off from the rapid increases we’ve seen recently.
Conclusion
The UK rental market is in a period of adjustment. Demand is easing from its recent highs, and the supply of rental properties is starting to improve. While rental prices are still expected to go up, the pace of growth will be slower compared to the last two years. In prime London, rents are stabilizing but remain higher than before the pandemic. This shows that while demand is strong and affordability issues persist, the market is starting to find a new balance.
