Surging Tenant Demand and Soaring Rental Prices in the UK Property Market

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Record High Tenant Demand: Anticipated Rent Increases in 2024

The private rented sector in the UK is grappling with a record high tenant demand, and projections suggest that this surge will persist, propelling prices higher in the coming year.

Persisting Supply-Demand Imbalance

The well-documented mismatch between supply and demand in the UK’s private rented sector shows no signs of abating. In fact, landlords face an unparalleled appetite for their rental properties. Moreover, this situation leads to an inevitable upward trajectory for rental prices.

Record Levels of Tenant Demand: Implications for the Housing Market

Similarly, Paragon Bank’s latest findings underscore the critical role of rental properties in the current housing market landscape. With persistently high mortgage rates deterring potential first-time buyers, an increasing number of individuals are opting for prolonged rental tenures. The research reveals a record high in tenant demand, with significant regional variations, highlighting the pressing need for increased investment in the buy-to-let sector.

Record High Tenant Demand

Regional Disparities and the Link Between Tenant Demand and Rental Prices

Regional Peaks in Tenant Demand

Paragon’s survey exposes regional variations in tenant demand, with the West Midlands leading the list at 76%, followed by Wales (75%), South East (74%), and East Midlands (73%). This regional perspective provides insight into the geographical nuances of the rental market.

Landlords Respond to Demand: Rental Prices on the Rise

Additionally, the survey indicates a direct correlation between heightened tenant demand and rising rental prices. For example, a staggering 87% of landlords acknowledge rent increases in their operating areas, with 70% having raised their rents in the past 12 months. The majority intend to implement further increases in the next six months, driven not only by demand but also by factors such as higher running costs and increased mortgage expenses.

Call for Investment Amidst Rising Demand

Richard Rowntree, managing director for Mortgages at Paragon Bank, advocates for increased investment in the buy-to-let sector. Furthermore, Rowntree highlights the persistent supply-demand imbalance. He emphasizes the urgency of addressing this issue. All in all, the goal is to alleviate competition among renters and mitigate the impact on vulnerable populations.

Record High Tenant Demand

Forecasted Rental Growth and Strategic Insights for Property Investors

Navigating Rental Growth Trends

For property investors, understanding current and forecasted rental prices is crucial for long-term success. Subsequently, JLL’s research forecasts a 22.80% cumulative increase in UK rents between 2024 and 2028. In 2024, a significant 5% rise is expected, followed by increments of 4.5%, 4%, 4%, and 3.5% in the subsequent years.

Supply-Demand Gap: Projections for 2024 and Beyond

JLL’s report identifies a persistent shortfall in rental homes compared to tenant demand since the mid-2000s. in other words, experts expect the cumulative deficit to reach 720,000 homes in the private rented sector by 2028. This ongoing supply-demand gap is set to drive rental growth, surpassing wage increases, with a forecast indicating that 2024 will see the most significant spike.

Transition to Homeownership: A Potential Equilibrium

In summary, JLL’s forecast suggests that attractive mortgage rates from 2025 onwards may prompt more tenants to transition into homeownership. Furthermore, this shift is anticipated to improve the balance between tenant demand and available rental stock. It has the potential to influence the dynamics of the rental market in the years to come.

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