The UK rental market has continued to experience a surge in demand, driving average asking rents for new tenants to record highs, new research has revealed. The national average asking rent outside of London has hit an all-time high of £1,231 per calendar month (pcm) representing an increase of over £300 (33%) compared to pre-pandemic levels in 2019 when the average rent stood at £923 pcm.
In London, the story is similar with average asking rents reaching a new record of £2,567 pcm. Although the pace of rent growth has slightly slowed, it remains in double digits for the seventh consecutive quarter, meaning London rents are now 28 per cent higher (+£559 pcm) than they were in 2019.
The researchers attribute this surge in rental prices to the increased demand for rental properties and a limited supply, which has been the case since the pandemic began.
Rental price hotspots
In terms of the top performing areas with the largest rental price increases, Edinburgh in Scotland scooped the top spot with average asking rents jumping 24.2 per cent from the previous quarter from £1,111 to £1,380pcm. This was followed by Luton in Bedfordshire with a 22.4 per cent increase (from £991 to £1,213pcm) while Staines in Surrey came third with asking rents rising from £1,407 to £1693pcm amounting to a 20.3 per cent increase.
Despite the rapid increase in rental prices, rental properties continue to let at a swift pace. The average time it takes to find a tenant for a property is currently 17 days, the fastest since November 2022.
However, despite this surge in prices landlords are facing various challenges in the current market, with those surveyed citing government sentiment towards the industry (47%), rising taxation (41%) and increasing compliance requirements (33%) as their main concerns. Additionally, a quarter (25%) of landlords are worried about the rising cost of buy-to-let mortgages. These challenges have led some landlords to sell their rental properties, with 16 per cent of properties currently for sale having previously been on the rental market, up from 13 per cent in January 2019.
According to the data from the property listing portal Rightmove, landlords are particularly concerned about properties with lower Energy Performance Certificate (EPC) ratings ahead of the Government’s proposed changes to EPC. A third (33%) of landlords who own lower-rated properties are considering selling them instead of improving their portfolio’s EPC ratings, compared to 20 per cent who had similar plans last year.
On landlords’ decisions to exit the market, Allison Thompson, National Lettings Managing Director of Leaders Romans Group, said: “Some highly leveraged landlords are considering selling due to interest rate rises but we find most are mortgage-free, and in most cases, our advice is to avoid a knee-jerk reaction. Interest rate rises are likely to reverse in early 2024 and in the meantime, the almost total absence of voids helps counter increased mortgage costs.”
Despite the challenges, landlords value having good tenants in their properties and are keen to retain them for longer periods. According to the data, the majority (57%) of landlords stated that tenants choose to stay in their rental properties for more than 24 months, with only 8 per cent indicating that tenants stay for a year or less.
Furthermore, tenant demand remains strong, up by 3 per cent compared to the previous year despite a slight easing in the gap between demand and supply. While the number of available rental properties is up by 7 per cent compared to the same period last year, it still remains 42 per cent below the levels seen in 2019.
Rightmove’s Director of Property Science Tim Bannister, added: “Average asking rents for new tenants have risen at a rapid pace since the pandemic reflecting the significant increase in demand, which is driven by a combination of factors including changed housing needs, such as some space to work from home. Landlords are currently having to navigate a multitude of challenges, but the data suggests it remains important to build long-term relationships with good tenants.”