UK rental market sees slower growth amid easing demand

The demand for rental properties in the UK is showing signs of slowing down, after reaching record levels in the past few years, a property expert says.

However, the market is still tight, with demand exceeding supply and rents are expected to keep growing in 2024.

That’s the verdict of Nicky Stevenson, the managing director of Fine & Country estate agents who points to rent growth of 9.7% in October 2023, higher than earnings growth at 7.9%.

She says: “This growth, although still significant, is slightly slower compared to the 11.9% seen during the same period in 2022.

“Rental demand has decreased by 11% from the unprecedented levels of the previous year but continues to outpace historical averages.”

Supply-demand imbalance is improving

Rightmove reports that the supply-demand imbalance is improving, with demand easing and available supply up 14% compared to 2022.

However, the market is still highly competitive, with the number of enquiries for each property more than tripling from eight in 2019 to 25 presently.

Ms Stevenson said: “The market is gradually evolving, and while demand is easing, competition remains fierce.

“Renters are having to adapt their strategies, being more flexible with schedules and preferences, and being prepared to swiftly undergo referencing to enhance their chances of securing a property in this competitive landscape.”

Rents are forecast to continue to rise steadily

Ms Stevenson notes that while rents are forecast to continue to rise steadily, peak growth has now passed with evidence of a cooling in tenant demand in the face of weakening affordability.

Although slowing, rent price growth is forecast to average 3.6% over the next five years.

London is anticipated to lead this slowdown, with rents predicted to rise by just 2% next year.

Higher mortgage rates will continue to impact new investment

Increasing regulation and higher mortgage rates will continue to impact new investment in the rental market, maintaining the continued supply-demand imbalance and keeping the slowdown in rental growth in check.

In the prime market, average rents have reached £3,852, reflecting a 5.6% year-on-year increase.

Rent growth in the prime markets is above 2% in all regions, with South West leading the pack with 19% year-on-year growth.

Ms Stevenson said: “The prime market is robust, with rents continuing to rise.

“However, challenges such as increasing regulation and higher mortgage rates are expected to influence the market dynamics, ensuring a controlled slowdown in rental growth.”

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