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UK rent prices surge at record rates

September 22, 2023

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Article Summary

Buy-to-let
  • London stands out within England, experiencing the highest annual percentage change in rent prices at 5.9%, the highest recorded figure since January 2006.

  • Across the UK, rent growth hit a new record high for the 16th month in a row, with costs climbing by 5.5% – the highest rate since national data began in 2016.

  • "Landlords who can weather these challenges are reaping the rewards with minimal-to-no void periods and steadily rising rental prices."

The facts and figures

Private rental prices paid by tenants in the United Kingdom have continued their upward trajectory, as revealed by data from the Office for National Statistics (ONS) for the year ending in August 2023. This surge, with an increase of 5.5%, follows the 5.3% growth seen in the year leading up to July 2023. The persistent rise in rental costs underscores the robust demand for rental accommodations amid the ongoing housing crisis.

Notably, London stands out within England, experiencing the highest annual percentage change in rent prices at 5.9%. This is the highest recorded figure since January 2006 when the ONS initiated data collection for this metric. In contrast, the North East and South West regions saw the lowest rate of rent increases at 4.8%.

The growth in rental prices hit a new record high for the second month in a row in August, official data shows. Rents in London jumped by 5.9% year-on-year, the fastest pace since records began in 2006, according to the Office for National Statistics.

Across the UK, rent growth hit a new record high for the sixteenth month in a row, with costs climbing by 5.5% – the highest rate since national data began in 2016. A massive imbalance between supply and demand has driven a surge in rental prices that began in the second half of 2021.

The ONS data tracks average rents across new and existing lets, whereas other indexes track only rents on newly let properties.

UK Rental Rates

Thoughts from those in property

Jeremy Leaf, a prominent estate agent based in North London and a former Residential Chairman for the Royal Institution of Chartered Surveyors (RICS), commented on these rental trends. He observed, “These more recent rental figures mirror what we have been witnessing on the ground – a shortage of housing stock continues to exert upward pressure on rents, particularly as the student population contributes to the demand for rental properties.”

Leaf added, “However, we have noticed a difference in the rents charged for new tenancies compared to those for renewing existing arrangements. Tenants appear to be reaching an affordability limit, and landlords are recognising the value of stable, long-term tenants over maximising short-term returns, unless their operating costs become unsustainable.”

Anna Clare Harper, the CEO of sustainable investment advisory firm GreenResi, offered insights into the situation. She noted, “So, what lies ahead? As landlords depart in large numbers, the availability of rental housing will diminish further, likely leading to even more substantial increases in rent prices. The solution does not lie in further regulation or rent controls; rather, it involves encouraging professional investors to reinvest in the private rental sector, taking the place of traditional, amateur landlords, as seen in countries with thriving rental markets, such as Germany.”

Harriet Scanlan, Lettings Manager at the Antony Roberts estate agency in Richmond, weighed in on the current market dynamics. She stated, “We are still firmly entrenched in a market marked by a shortage of available properties. Just this week, we introduced two new rental properties to the market, both of which attracted multiple offers and subsequently surpassed their asking prices. Instances like these clearly illustrate how the supply-demand imbalance is impacting rental rates.”

Scanlan continued, “One of the primary reasons driving private landlords to exit the buy-to-let sector is the shift in tax regulations, primarily the reduction of mortgage tax relief. In recent months, the interest rate hikes have also directly impacted some landlords’ profit margins. However, those landlords who can weather these challenges are reaping the rewards with minimal-to-no void periods and steadily rising rental prices.”

UK property

Conclusion

Despite what may be perceived to be a struggling property market, the ever-growing gulf between supply and demand will attract seasoned property investors as well as first-time investors with a savvy eye. The increase in rental yields coupled with the ever-increasing capital appreciation of new-build properties all over the UK highlight how rewarding owning a buy-to-let property is, as well as the newly dropping mortgage rates.

To learn about the property investment opportunities above, or to find out more about how property investment works, get in touch with the experts at North Property Group today.

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