UK rental market to remain strong despite supply recovery

UK rental market to remain strong despite supply recovery

0:01 AM, 16th January 2024, About 5 months ago 1

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The UK rental market is expected to see solid growth in 2024, despite a gradual recovery in supply, according to Knight Frank.

The property consultancy said that landlords had exited the sector in recent years due to higher taxes and regulations, which had driven up rents.

However, supply was improving as more sellers opted to become landlords in a flat sales market and renter demand was slowly easing.

‘Rental market grapples with the same supply-demand issues’

The firm’s head of residential research, Tom Bill, said: “Across the UK, annual rent growth was 6.2% in November, according to the ONS, the highest rate since records began as the wider rental market grapples with the same supply-demand issues.

“As these reduce gradually, we expect UK rental value growth to decline slightly to 5% this year, with a slightly higher figure of 6% in London, where demand is strongest.”

He added that prime central London rents will rise by 5.5% this year, and prime outer London (POL) will increase by 8%.

Mr Bill also says that rising mortgage costs, taxes and regulations such as the Renters (Reform) Bill should keep rents high this year by limiting supply.

Knight Frank’s data also revealed that there were 4.3 new potential tenants for every prime rental listing below £1,000 per week in the last quarter of 2020. Above £1,000 per week, the ratio was 2.7.

UK house prices are stabilising

Knight Frank also said that UK house prices are stabilising after a slump in 2023, citing data from Halifax and Nationwide.

While Halifax reported a 1.7% rise in 2023 and Nationwide recorded a 1.8% drop, both had indicated a 5% fall in August.

The firm said that it had waited for a clear trend to emerge before revising its price forecasts, which it believed was now the case.

As a result of stronger demand, the number of mortgage approvals was 10% higher in November than the previous year and Knight Frank expected a double-digit percentage increase in sales volumes this year compared to 2023.

Mr Bill said: “We now expect UK mainstream prices to rise by 3% in 2024, which compares to a decline of 4% predicted in October.

“With low-level single-digit growth in subsequent years, we expect cumulative growth of 20.5% in the five years to 2028.”


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Comments

AJR

9:36 AM, 16th January 2024, About 5 months ago

Not sure there’s enough evidence to suggest that the PRS is growing again.

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