Home Property HULT Private Capital Insights on the UK’s Booming Rental Market

HULT Private Capital Insights on the UK’s Booming Rental Market

Across the UK, the property rental market is presenting investors with excellent opportunities to supplement their portfolios. Property website Zoopla has announced that rents outside London are rising at their highest rate for 13 years. On average, renters outside the capital are now paying £456 a year more than they were in 2020, with monthly rates now averaging £790 compared to £752 last year.

Nevertheless, these levels of rent remain affordable for tenants, and demand for city-based rental properties is surging as people return to urban areas following the worst of the pandemic. Whilst the London market is seemingly lagging behind, the same factors that have driven growth elsewhere will soon propel its value upwards too, likely towards the end of 2021 or by early 2022. 

A return to city life

During the early stages of the pandemic, city renters retreated to rural areas to minimise their exposure or moved back in with family. Now that cities are reawakening as offices, hospitality and leisure facilities reopen, people are being drawn back to urban living. 

Consequently, tenant demand is rocketing. In August, it was almost 80 % higher than the average level from 2017 to 2019. This rebound has been especially marked in London, where rents in the 12 inner boroughs rose an average of 2.3 % between May and July.

However, the supply of rental homes is failing to meet this demand. Whilst demand for rental properties has grown by 19 % this year, stock of homes to let has fallen by 13 %. Not only has this disparity driven rents up significantly, the rental market is now moving at a pace not seen since 2016. In many big cities, such as Newcastle, Cardiff and York, properties are taking an average of two weeks to let. 

What does this mean for investors?

Rental demand is expected to remain high as the influx of city dwellers continues. Much will depend on how Covid regulations evolve, however if things remain as they currently are, the on-going increase in demand and low supply will continue to drive rents upward. Nonetheless, with growth in average earnings outstripping climbing rents, rentals should remain affordable for tenants who are employed. 

This is all good news for those looking to profit from the rental market. This favourable climate is consolidated by wider trends in the UK housing market as the country’s comparably lower property prices draw the attention of investors outside of the UK. Conditions are set fair for a rebalancing of UK prices in line with Europe and this will give the rental market an added boost.  

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