Cities with the highest and lowest rent increases:
Rental prices continue to rise in the UK as the successive interest rate increases, price buyers out of mortgages, and the cost-of-living squeeze tightens. According to the Office of National Statistics (ONS), rental prices in the UK rose by 4.7 per cent from 12 months to February 2023. It rose from 4.2 per cent in the 12 months to December 2022.
According to the ONS, this marks the most significant annual percentage change since the UK series began in January 2016. However, the data from the ONS only reflects the increases for tenants who have stayed put or renewed their tenancies. The rent increases for new tenancies have been even higher.
According to Zoopla, the rate of rent increases for new tenancies in 2022 was at the highest level for the last decade. The average rent for new tenancies in the UK rose by 11.5 per cent. In 2022 landlords sold 35,000 more properties than they bought, with the rental sector losing on average 66 properties a day, according to research conducted by Hamiltons.
The demand from tenants is still 53 per cent up where it was before the pandemic, and the number of properties available to rent has fallen by 38 per cent since 2019. It is likely to increase even further as the imbalance between demand and supply increases.
Regions with highest and lowest rent increases:
The chart below highlights the areas which have seen the highest and the lowest increases in rent across the UK. London saw the highest increase of 16.1 per cent, with average rents reaching £1,976, and Northern Ireland saw the lowest increase of 5.9 per cent, with average rents at £688. The overall rents across the UK increased by 11.5 per cent, taking the average rent in the UK to £1,118.
Source: Zoopla
Cities which saw the highest rent increases:
According to Zoopla, high levels of rental inflation are not just exclusive to the capital, but Manchester and some Scottish cities have seen record-high increases in the prices of new lets.
As the chart below highlights, London saw the highest rental increases for new lets at 16.1 per cent, followed by Manchester, Glasgow and Edinburg, all recording double-digit rental increases. According to Zoopla, the above-average increase for new lets is driven by the growing gap between demand for renters and the supply of homes to let in these cities.
What will be the outlook for the rental market in 2023?
All indicators are that the rental market in 2023 will continue to increase, albeit slower. According to Zoopla, supply will remain tight due to landlords' lower levels of new investment. A strong labour market and high borrowing costs will continue stimulating the demand for rental homes.
However, steep rental growth is only sustainable in the short term. Affordability pressures will start to limit the upward pressures on rent, so we expect rental growth to slow down in 2023 towards a national average of 5 per cent.