There are minimal indications of rental growth slowing down, cautioned Hamptons. The price of a new tenancy has surged by 9.9% YoY across the UK, averaging £1,282 pcm. Annually, rents have consistently increased by over 5.0% for 27 consecutive months, with the past 10 months seeing growth above 7.0% This sustained growth has elevated the average rent by 28% compared to February 2020, just before the pandemic.
In the last year, London’s rents have continued to outpace other regions, with the average cost of new lets rising by 13.9%. London rents have experienced double-digit annual growth for 15 out of 17 recent months. However, the pace of growth in Inner London has slowed as rents surpass pre-Covid levels, now resembling Outer London’s growth. Looking back to the pandemic’s onset, the North has seen faster rent growth than the South.
While average rents in London and the South East have risen by 26% and 24% respectively since February 2020, the Midlands has experienced a 31% increase, and Northern England a 33% rise. These regions have seen rents climb due to robust house price growth alongside steady yields.
Aneisha Beveridge, Hamptons’ head of research, comments: “Newly available homes on the market continue to achieve record rents, and it’s challenging to predict factors that would significantly slow this growth in the short term.
“With approximately 35,000 landlords transitioning off fixed-rate mortgages monthly, the upward pressure on their costs persists. Prior to remortgaging, landlords are striving to maintain financial equilibrium by reducing debt and raising rents that had fallen below market rates.”
The strong trend in rental growth can be attributed to various factors that impact the dynamics of the property market. A significant catalyst is the enduring demand for rental properties, driven by variables like shifting demographics, economic uncertainties, and the flexibility inherent in renting.
Moreover, the repercussions of the pandemic on housing preferences have significantly shaped the rental landscape. The adoption of remote work, evolving priorities, and financial considerations have prompted many individuals and families to reassess their housing options, with some opting for rental properties that better align with their changing needs.
Looking ahead of the current situation, the rental market could encounter fluctuations as the broader economic context evolves. Elements like inflation, alterations in interest rates, and government policies can all wield influence over the direction of rental growth in the forthcoming months.
Given the dynamic nature of the rental market, landlords and tenants alike are navigating a terrain that necessitates adaptability and well-informed decision-making. Landlords face the challenge of striking a balance between covering expenses and offering competitive rental rates, while tenants must evaluate their housing prerequisites and financial limitations.
In summary, the rental market’s resilience and sustained expansion are the outcomes of a multifaceted interplay of factors that go beyond simplistic supply and demand interactions. Although recent trends point towards ongoing growth, the landscape remains subject to a multitude of economic, social, and policy-related variables. Staying vigilant to these factors is crucial for all stakeholders in the rental market as they make prudent choices for the times ahead.
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