Lettings Market Updates, April 2023

Stable prices and low void periods summarise the current state of the UK and London rental markets. Demand for rental properties continues to outweigh supply this spring with an average of ten registered applicants per property. Compared to February this year, the cost of rentals in March increased fractionally with upward pressure remaining across the country.

Zoopla reports that the average rents for new-lets in London have increased 11.1% in the last 12 months to March 2023. Over 60% of properties on the rental market are being snapped up within a week of being listed, and one in six are let within 3 days, according to the latest Dataloft research poll. Less than 3% of properties are currently on the market for more than 2 weeks.

Void periods in Greater London declined again from 13 days to just 12, which is another indication of a strong letting’s market. 

Supply & demand

The overall rental supply growth in big UK cities will remain limited in 2023, while demand remains strong, although a bit lower than in 2022, state major private housing rental index reports.

ARLA (the leading membership body for property agents) reports that in March 2023 an average of 10 prospective tenants enquired per each available letting property. Demand for privately rented homes is 10% higher than this time last year, reports Zoopla.

The number of privately rented homes remains largely static, and new supply through investment is offset by properties leaving the lettings market, in most cases through sales.

A slight reduction in landlord sales has been recorded in early 2023. 11% of homes listed for sale were formerly rented, down from over 13% during same period last year. According to Countrywide Property Services Group, landlords sold 35,000 more properties than they bought in 2022. The overall prediction is that the rental price growth is anticipated to outpace sales price growth in the UK market over the next five years.

Corporate investment in the so-called ‘build-to-rent’ sector is picking up across big cities. Ongoing completion of build-to-rent schemes is on the increase, adding supply at the mid-to-upper end of the market.

Moreover, there is a persistent high rental demand in major UK cities, driven mostly by high economic immigration and the influx of students. The biggest push comes from the strong job market, which has attracted high-skilled immigration benefiting from recent UK visa rules. International student migration is also a considerable factor when it comes to demand as well as rental inflation in major cities.

This spring, London’s rental market professionals are focused on the impact corporate tenants, tourists and other short-term visitors make on the available housing stock. It is estimated that that 8% of currently rented UK homes are in this holiday/short-let sector.

Furthermore, many potential buyers are staying put in the rental market because of high-interest rates on mortgages, which limits the purchasing power in the first-time buyers’ sector. The same challenging conditions continue in the rest of the mortgage-reliant investment sector such as buy-to-rent.

Rental growth by London Boroughs

Newham, Tower Hamlets, Greenwich, Lambeth, and Westminster are the top five London boroughs with the highest rate of rental increase in 2022. The newly built, energy-efficient homes to rent, improved connectivity (Elizabeth Line opening), and popularity amongst students and professionals are all factors that contributed to the rental growth in these areas. London tops the league tables for new-let rental inflation at 15.2%.

The supply in the Prime Central London lettings remains below its historic levels as this segment is recording a high level of tenant renewing leases, thus leaving fewer rental properties to reach the market. Part of Prime Central London are Kensington & Chelsea and the City of Westminster, boroughs where more than 40% of rented properties are privately owned. One-third of demand is accredited to young professionals preferring long-term tenancies, but there is a growing wealthy international student population moving to this area too.

CLICK HERE to read the lates rental market report from ZOOPLA

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