Tenant demand is up 23% on this time last year, whilst the number of available rental properties is down 9%, according to Rightmove. Would-be first-time buyers are continuing to rent as they wait for mortgage rates to drop, which is putting pressure on the already insufficient supply of rental properties.
Widespread migration back to major cities, where costs are typically higher, has led to an increase in the demand for more affordable flat types. This has been compounded by the generally higher cost of living, which is shrinking tenants’ budgets and forcing many to look for cheaper, albeit smaller, properties.
Demand for studios soars
In the third quarter, the demand for studio apartments in the UK rental market increased by an immense 71% year-on-year. There are now four times as many tenants looking for a studio flat as there are studio flats available, and studios have overtaken one-beds as the most sought-after flat type.
Overall, the availability of smaller rental properties (such as studios and one and two-bedroom apartments) is down by 4% when compared to last year.
UK rents hit new highs
In Q3 2022, rental prices for tenants outside of London increased to a record-breaking £1,162 per calendar month according to Rightmove’s quarterly Rental Trends Tracker. The average UK rent rose 11% annually, with an increase of 3.2% in the last three months.
This is the only third time rents have risen by 3% or more in one quarter.
The average rent in London was double the UK average at £2,343 per calendar month. London saw the highest regional growth rate on record, up 16.1% year-on-year.
Moreover, estate agent Foxtons revealed that rents in London had risen 22% annually in the first nine months of the year, with the average rent now at £571 per week.
In Manchester, rent prices leapt 20.5% in a year—well above the 11% UK average.
As affordability continues to decline, and a growing number of renters hold off from buying a home, the rental market will continue to feel the pressure of an unprecedented supply and demand imbalance. With this, investors can expect high occupancy levels and sustained price growth across UK rental markets.
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