The UK’s rental market is in a crunch with a dire need for 50,000 rental homes to alleviate a persisting shortage and return supply to pre-pandemic levels, according to recent findings from Rightmove. Despite a gradual improvement, the current situation remains challenging for many tenants facing high rents.
In an environment where tenants have been grappling with escalating rental costs, there’s a glimmer of hope as the speed at which rents are increasing has begun to slow. The average rent outside of London has now reached £1,291, marking 17 consecutive months of record-setting figures. This figure represents an 8.5% increase from the previous year. In London, rents have soared to an astonishing £2,633, although the rate of growth has cooled to 5.3%, down from a staggering 16.1% in the third quarter of 2022.
A Market Still “At a Very Hot Simmer”
Tim Bannister, Rightmove’s Director of Property Science, explains that while the rental market has cooled from its peak, it’s still far from comfortable. “The rental market is no longer at peak boiling point, but it remains at a very hot simmer,” he notes. Bannister highlights that despite more available rental options and a reduction in competition among tenants, the overall market balance is still significantly skewed by the ongoing supply deficit.
The Supply-Demand Gap
Rightmove’s data indicates an increase in rental properties, up by 11% from last year, but this still falls 26% short of the numbers seen in 2019. The high demand is evident from the fact that searches for rentals have only decreased by 17% year-on-year yet are still 54% above pre-pandemic levels. The average rental property now receives 13 enquiries, a significant increase from just five in March 2019.
Impact on Tenant Affordability
The strain on tenant affordability is considerable, with the highest rate of rent reductions observed in five years. Currently, 22% of rental properties have seen their rents reduced to meet affordability challenges. The most significant impact is on larger homes, such as four-bedroom detached houses, where a record 30% have experienced price reductions.