The UK rental market has been a big success story for many years now. It has grown continuously through the pandemic and the more recent economic uncertainty, and now new housing market data shows why investors can expect even more rent inflation in the future.
Zoopla reports that the number of houses sold in 2023 is likely to be the lowest for at least a decade. Completions on sales are expected to fall by 21% this year to a total of just 1 million thanks to the soaring cost of mortgages which is putting people off. Cash sales are remaining strong, but overall the number of sales completed using a mortgage is predicted to be 28% lower than the 2022 total.
Zoopla said: “Mortgage rates have started to fall slowly but rates need to fall below 5% before we see an increased appetite to move home in the second half of 2023. These trends will continue over the rest of 2023 and into 2024.”
Predictions like those above are causing some to speculate about what might happen to house prices, but there is another far more interesting effect for investors – the increasing rental demand that will follow.
The fewer people can afford to move, the more people will remain in the rental sector. This puts even more pressure on the available housing stock and creates a higher level of demand which goes on to push rents higher than ever.
The latest figures from the Office for National Statistics show that private rents have increased by an average of 5.3% in the last year in response to the lower number of house sales. The Royal Institution of Chartered Surveyors agrees, stating in its July UK Residential Market Survey that the three months to July 2023 saw the strongest quarterly rise in tenant demand since the start of 2022.
Together, this means that landlords can expect higher rents in the next 12 months and probably beyond. Without a major increase in the available supply of homes – which is not happening thanks to low construction rates – we can expect the rental market to keep growing.
Read on to find out more about three markets in particular which offer a strong investment proposition.
Manchester
Property listings for available rental homes in Manchester have fallen by 24% in a year according to the latest reports from JLL, and this has pushed prices higher than ever. Alliance City Living’s up-to-date market analysis shows that all types of city centre apartments in particular are in high demand.
Studios, one-, two- and three-bed apartments are all seeing year-on-year rent rises of at least 11% according to this research. In the future, Deloitte has noted that there are 11,759 new homes in the pipeline, but that will not be enough to meet demand from the 20,000 people moving to the city in the next three years.
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Birmingham
Aside from Manchester, Birmingham is arguably drawing more attention than anywhere else in the UK from property investors. Its mix of a growing population, lack of housing supply and major economic investment programmes makes it the ideal place to find a growing property market.
JLL’s Big Six Residential Market Report shows that prime rents in Birmingham have gone up by 12.4% in the last year. As with Manchester and the UK as a whole, this is a consequence of a supply issue. The Deloitte Crane Survey shows that 6,487 homes are in the pipeline for the next five years, but this does not scratch the surface in a city which needs approximately 4,000 new homes a year for its growing population.
More rent rises are on the way in Birmingham, making this the perfect time to invest in premium apartment buildings like NBHD Heights. Click here to see more about the city’s most impressive new luxury development.
York
While not as large as either Manchester or Birmingham, those looking for the UK’s next best investment hotspot should be very interested in York. Much like other major UK regional hubs, York has a shortage of available rental properties already and the fall in people buying homes means that more people than ever are renting for longer – pushing prices higher.
Recent figures from the Office for National Statistics show that the average rent in York has increased to more than £850, compared to £800 last year. This is a big rise and a sign of things to come in the city. Luxury property close to the city centre and the train station continues to be extremely popular and a great investment prospect.
Want to learn more about investing in York? Click here to see our latest development in York, City Gate, and find out more today.
