Agency says prime rental demand is ‘unprecedented’

A leading lettings agency says that prime rental demand in the UK is running at an unprecedented level and is up by more than 20% year-on-year.

That’s according to Nicky Stevenson, the managing director of Fine & Country UK, who points out that prospective home buyers are having to rent for longer because of higher mortgage costs and ‘signs of a market recalibration’ which is seeing house prices fall.

Ms Stevenson also notes that the availability of new properties is lower than the demand from buyers – and that competition among renters is fierce.

‘Rental threshold of a prime property now stands at £2,800’

She said: “Looking at the prime rental market, the rental threshold of a prime property across England and Wales now stands at £2,800, up from £2,400 a year ago.

“The average prime market rent is £3,715, which equates to a year-on-year rise of 17%.

“A consensus of independent forecasts expects rental value growth in the UK of 4.8% over the course of 2023, with compound rental growth set to exceed 20% in the five years from this year until 2026.”

Rental sectors in the UK’s major cities will perform strongly

Ms Stevenson adds that experts are predicting the rental sectors in the UK’s major cities will perform strongly over the next 12 months.

She said: “Alongside London, activity levels in regional cities including Manchester, Birmingham, Leeds, Bristol and Liverpool are anticipated to remain high.

“With running costs and energy efficiency increasingly on the mind of homeowners and renters alike, new-build city centre homes are likely to be in high demand.”

Focussing on smaller properties to keep warm

Another issue is that while renters wanted homes with more space because they were working from home during the pandemic, she notes that tenants now appear to be focussing on smaller properties to keep warm – and enjoy lower heating bills.

Ms Stevenson said: “Rightmove reports studio apartments have overtaken one-beds as the most in-demand type of property for renters.

“Competition is up over 70% year-on-year as stretched affordability has seen renters look for smaller properties to enable them to stay in central locations and enjoy the benefits of a city centre lifestyle.”