The UK property market not only weathered the Covid-19 storm, but emerged from it stronger than ever before. During a difficult time for the economy, we can look back and see that property was stable and secure, proving its credentials as a premium investment option.
Now that we are firmly into 2022, it is the perfect time to assess UK lettings and sales to see where they stand, and to answer the question: is covid is still having any effect on the rental market?
UK rental market displaying significant growth
The UK rental market is growing rapidly according to the latest Rent Index from the Deposit Protection Service (DPS). The average rent across the country reached £834 in Q4 2021, which equates to a 2% increase over Q3 2021 and a 5.3% increase annually.
When London is excluded from the figures, the average rent stands at £737. This represents a 1.5% increase over Q3 2021 and a 5.4% annual increase, according to the same Index.
If we look at the finer details, average rents and demand have both increased across all property types. Notably, the average rent for terraced properties has increased by 6.7%, and apartments have seen an increase of 5.4%.
The latest Rightmove Rental Tracker records even more impressive growth than this. An 32% increase in tenant demand has driven annual rental growth of 9.9%, according to the property portal, and an average monthly rent of £1,086 when the figures for Greater London are included. Consequently, Rightmove believes that rental yields in the UK are at their highest point since 2016.
In certain locations such as Manchester we have seen even more impressive growth. As per the latest figures from Alliance City Living, studios (+18%), one-beds (+11.2%), two-beds (+18.5%) and three-beds (+12%) all saw huge rent increases over the year.
Regional rental growth patterns
The UK rental market is growing nationally, but there are some interesting regional patterns when we dig into the data a bit further.
The DPS records rental growth of at least 4% in all regions across the last year, with each quarter within that year demonstrating robust growth. This consistency shows the underlying strength that defines the UK rental market and should offer investors a large degree of confidence going forward.
Returning to the Rightmove Rental Index, we can find further support for this positive outlook in the regions. For example, the North West saw 12.5% rental growth in the last year as competition for the best homes grew at the same time as new supply fell. This was centred on cities like the aforementioned Manchester and Preston [LINK]which are set to have long-term supply issues in the future – making it likely that rents will continue growing strongly in those places.
Rightmove further notes that the strong regional growth in rents is due to competition between tenants for available properties nearly doubling in the space of a year. This is due to the number of available properties falling by 51%, and indicates that further rent rises are likely in the future.
Resales market equally strong
This lack of availability is also reflected by the resale market which has a similar undersupply of available properties which is leading – predictably – to house price growth.
Asking prices in the UK rose by a record 2.3% in February, according to Rightmove. This is the biggest monthly increase in 20 years and has pushed the average house price to almost £350,000. In total, property values have gone up by an average of 9.5% across the country.
Furthermore, while the number of new property listings increased by 11% during the month, the number of people looking to buy a property rose by 16%.
A Rightmove spokesperson commented, saying: “This new record means that average asking prices have now risen by nearly £40,000 in the two years since the pandemic started, compared to just over £9,000 in the previous two years.”
It is likely that the widening gap between the number of buyers and sellers – and the overall lack of new supply in the national pipeline – will continue to boost house price inflation and prove the strength of the resale market.
For investors, this means that you can expect record rents, the prospect of high capital appreciation, and an increasing pool of potential buyers should you choose to sell your property.
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