UK rental growth is accelerating through a lack of supply and increasing demand.

After 15 months of failing rental prices, the London rental market has moved to a period of growth. The demand for rental properties reached its peak in Q3 2021, and according to many industry analysts, it hit the highest level over a decade.

The lockdown induced desire for space and city dwellers’ decision to relocate to more rural "out of the town centre" areas dominated the market for almost 18 months and has been entirely linked to the Covid-19 pandemic. This change combined with the reduced ability to search and physically view available properties, had kept the market well subdued in terms of rental property demand, prices, and growth especially in the larger UK cities.

The market change came in Q3 2021 with a sudden, soaring demand reported from urban places across the country. This rise in rental property enquiries has been attributed to the change of consumer (tenants) behaviour in terms of location preferences and ability to search. Back to the city “centre living” trend came because of the increased mobility, employment levels and the decline of life-threatening infections in the city environments. Corporate city workers and the returning students led this shift which consequently generated higher rental demand levels.

At that precise moment, the available rental stock growth in the UK commuter belt cities was depressed, almost negligible. In November last year, Zoopla reported that “the UK supply of available rentals was 43% below the five-year average”. London’s prime letting agents reported at the time that the level of rental stock available was half the size of stock in the final quarter of 2019 (Kensington and Chelsea). The City of London saw a -47% reduction, followed by Camden (-44%) and Westminster (-42%).

The falling number of the new listed properties with proximity to places of study, work and good transport links keep the upward pressure on prices, particularly in London. Reflecting on the last three months of 2021 Savills’ report highlights the area of Canary Wharf where values were up 12% since the start of the pandemic.

According to a recent report from Zoopla, London’s rents went up +4.7%, in Q3 2021, which is “an annual growth of +1.6% compared to falls of almost 10% at the start of the year”. Based on “the structural undersupply of rental properties across the country, the forecast is for the rents to rise by a further 4.5% by the end of 2022."

In the current market conditions, London’s rental bounce-back is likely to persist with the strong rental value growth throughout 2022. After all, the Capital is going to maintain its position as a high-demand market in need of a steady supply of good quality, secure homes fit for long-term tenancies.

At Chase Evans, applicant levels are back up to 2019 levels and due to the lack of rental stock, only 7% of all registered applicants were housed. Since the start of the year, we have seen an increase of 15 % in tenant applications compared to the same time last year.

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