The evidences of rising demand for rental properties is apparent in the rising UK rental prices, which has increased by 8.3% in the last year. It is to be noted that that although there is high rental demand, the pace has considerably slowed down. While the rise in UK rental prices were in double digits in the last two years, it has come down to single digits now. Here are two factors, we believe, influenced the inflation in rental prices.
Mortgage rates
The 2024 rental market has continued to experience a surge in demand since the beginning of the year, and it owes its reason to the high mortgage rates which stands at 5.25% currently. That subsequently sets the interest rates for borrowing money at a parallelly high rate and this has weighed down on potential first-time property buyers to rent out instead!
Job market conditions
The prevailing job market situation – the rise and fall in income determines the affordability of rental prices by the public. An increased earning would help in tackling rental price hikes and contribute towards increasing demand in the rental market.
Here is a breakdown of UK rental market
The following data is taken from Savills: Scotland is currently experiencing the most inflation in rental prices with over 10% increase – the 3% rental cap initiated in 2022 has pushed the landlords to increase the rents for newly agreed rents. London, which is constantly known for its cost-of-living difficulties, has surprisingly seen a slight fall in rental prices – London recorded a 6.4% increase in rental prices. There have not been any fluctuations in rent in Yorkshire and Humberside, maintaining a £852 PCM. The northern regions rental grown exceeded the expected average with 9.8% increase in Northwest and 9.9% increase Northeast, while being the cheapest regions to rent.
What does the future for rental market looks like?
The Office for National Statistics (ONS) has observed a 6.2% rise in the rent paid in UK for the month of January 2024. This figure has now been constant for the last two months, inadvertently stating that the tenants might have started hitting the limit on high rent ceiling. The supply of rental properties has always fallen short to its demand, but it seems to have picked up in recent times indicating the possibilities of a not so strong rental growth in the future.
