Tenant demand easing at last says agency chief

The UK's rental market is experiencing a slowdown says a lettings chief.

Nicky Stevenson, Managing Director of Fine & Country notes that while supply has seen a modest improvement, the gap between demand and supply remains a significant influence.

“Rental growth has moderated to +7.5%, a decrease from +9.8% recorded a year ago. The cooling trend in rental inflation is evident across the UK, with London witnessing the most substantial deceleration” she says.

“Despite a slight uptick of 0.9% in rents in March, based on Hometrack data, rental demand has diminished by a fifth over the past year. Contributing factors include the waning effects of the pandemic, a slowdown in the labour market, and enticing lower mortgage rates for first-time buyers, as reported by Zoopla” Stevenson comments.

In a positive turn, the supply of rental properties is on the rise. Propertymark’s latest Housing Insight Report reveals a 29% surge in available rental properties, marking an 18-month peak. Yet, the persistent demand-supply imbalance suggests that rental prices are likely to sustain their upward trajectory.

According to Stevenson, February saw a reduction in the average void period to 18 days from 22 days in January, marking an 18% decline. All UK regions, barring the South West, observed shorter void periods, as per Goodlord data. 

She notes that since the pandemic, rents have escalated by an average of 29%, pushing a significant number of properties into higher price brackets. 

Currently, over half (51%) of rented properties in the UK are located in areas where the average rent exceeds £1,000 per month – nearly double the figures from five years ago, according to Zoopla. In the prime rental segment, the average rent stands at £3,950, reflecting a 2.1% year-on-year increase. 

The South West emerges as the frontrunner in prime rental growth, witnessing a robust 14.7% annual surge.

Stevenson adds: “The evolving dynamics of the UK's rental market underscore the resilience and adaptability of the sector amidst changing economic landscapes. The moderation in rental growth, combined with a significant increase in supply, offers a glimmer of relief for tenants. 

“However, the persistent demand-supply imbalance remains a dominant force, ensuring that the upward pressure on rents persists. As the market continues to mature post-pandemic, we anticipate further adjustments to cater to evolving tenant needs and preferences."