Is the rental market running hot or cold, and what can we expect in the coming year?
Let’s dig into the latest data from the Office of National Statistics (ONS) and property portal Zoopla to find out.
Taking stock
Unless you spent 2023 hiding under a rock, you’ll know that rents rose last year.
A combination of higher interest rates, which put pressure on buy-to-let (BTL) mortgages, and high inflation saw rents increase. The real question is, by just how much?
The latest ONS data shows rents in the UK grew by 8.6% in the year to July 2024. A further breakdown shows the average monthly rent rose to £1,319 in England, £965 in Scotland and £748 in Wales.
Looking ahead
According to a new report by Zoopla* rents are still rising, but more slowly than they have in the past three years.
Or, as Richard Donnell, Zoopla’s executive director, puts it: the market has moved from “red-hot” to just “hot”.
Zoopla predicts that overall rents are on track to grow by 4% over 2024.
This figure should be considered alongside other market changes – in particular, a more favourable outlook on interest rates.
The Bank of England dropped interest rates in August – for the first time in four years – and the markets expect at least one more cut by the end of 2024.
Many lenders have dropped their rates to stay competitive. In mid-August, the average BTL rate for a two-year fixed deal was 5.41%. In summer 2023, the average was 7%**.
Demand
As for demand, well, it’s still strong; Zoopla says there are, on average, 17 tenants chasing each listed rental property.
And the situation is unlikely to change dramatically in the near future as demand continues to outstrip supply.
While the new Labour government has vowed to turbo-charge the UK’s sluggish housebuilding record, any turnaround will take time.
To get a residential development of any scale through the design and planning phases and then get it built is a long-term project.
Outlook
BTL investors who buy wisely and take their responsibilities as a landlord seriously, can enjoy a consistent source of income and capital growth.
Want to know more about the rental market in Medway? Contact us today.
*Source: Report by Zoopla for the BBC, August 2024.
**Source: Moneyweek.