In today’s fast-paced and ever-evolving property market, one of the most critical decisions a landlord must make is determining the appropriate rental price for their property. With recent data revealing that average asking rents in London have surpassed £2,500 for the first time and national average rents outside of London have reached a new record of £1,190 per calendar month (pcm), landlords may find themselves questioning whether they are charging enough.
The most recent statistics highlight the continued growth of the rental market, with average asking rents outside of London rising for 13 consecutive quarters. This sustained growth is driven by several factors, including increased demand for rental properties, limited housing supply and evolving tenant preferences.
Supply still constrained, but showing slow signs of improvement
Despite the continued uplift, the latest research from Rightmove, suggests the pace of rent growth is slowing, having eased for three quarters in a row.
The rental market continues to experience an imbalance between supply and demand, with a 6 per cent increase in available properties compared to the near-record low levels of last year. In the first quarter of this year, the number of available rental properties rose by 8 per cent. However, supply remains historically low, currently 46 per cent below 2019’s level.
Although the gap between supply and demand has slightly improved in comparison to last year, a significant imbalance persists as the number of tenants seeking to move continues to exceed the number of available rental homes. The competition among tenants has eased by 2 per cent compared to the previous year, but it remains more than double (+173%) the level witnessed in 2019.
This intensified demand can be attributed to the number of tenants looking to move, which is now 4 per cent higher than the same period last year and 48 per cent higher than in 2019.
Overall, terraced houses experienced the most significant gap between supply and demand, with more than four times as many tenants enquiring as there are properties of this type available to rent. Conversely, flats are currently the property type being rented out the quickest.
Craig Webster, Managing Director of Tiger Sales & Lettings in Blackpool describes the current tenant trends his branch has been seeing: “The rental market remains very busy, with multiple applicants competing over a shortage of property to rent. We’re seeing more tenants staying put in their current home, which is having a knock-on effect for the rest of the market and contributing to the shortage. We are also seeing some of our landlords decide to sell up for a variety of reasons – more legislation to navigate, higher mortgage costs, or because they can now get a good price for their home.
Rental Hotspots
When analysing rental hotspots High Whycombe in Buckinghamshire came out tops when comparing average asking rents in Q1 2022 versus Q1 2023 with the town experiencing a +22 per cent annual change. This was followed by Farnham in Surrey (+21.9%) and Edinburgh, Scotland (+20%).
Rental Yields
With regards rental yields, the North East leads the way with a 7.9 per cent average yield in Q1 2023, however, this figure is down marginally (-0.01%) on Q1 of last year. Scotland secured the second highest yield of 7.8 per cent year-on-year followed by Wales at 6.9 per cent.
Tim Bannister, Rightmove’s Director of Property Science, commented on the figures: “We have seen some early signs of improvement on squeezed supply levels this year, though with no significant influx of new properties becoming available to rent currently on the horizon, the mismatch is set to continue for some time. Many agents are having to manage a very high volume of tenant enquiries for every property that they let in the current market. Properties in popular areas within an affordable asking rent range of that local area are likely to be snapped up almost immediately, and on average homes are finding a tenant much more quickly than this time in 2019. Although there are some early signs that the gap between supply and demand is starting to narrow a little, it will still feel very competitive for tenants trying to secure a home.”
As a landlord, it is essential to keep up to date with these market changes to ensure that your properties remain competitive and profitable. Based on the latest figures, are you charging the right rent for your property portfolio?
