As pressure mounts on the UK government to do more to support the rental market as housing supply remains low, landlords continue to see growth in tenant demand and rents.
New data shows that, after a record-breaking month of rental price growth in July, August offered more of the same for the rental market, albeit at a slightly reduced pace.
The latest report from Goodlord found that average rents for August were £1,438, which is very slightly lower than the £1,470 recorded in July – but rents are now 7% higher than they were 12 months ago in August 2023.
This comes as industry bodies continue to call on the government to act on boosting housing supply in the UK rental market by incentivising property investors and landlords to invest in buy-to-let properties, which would improve affordability for tenants by reducing the level of competition in the market.
Making changes to the way landlords’ incomes are taxed by reversing changes to Section 24 is the most called for change. This would see landlords once again be able to offset the full cost of their mortgage interest payments against their tax bills.
Despite these changes, though, for landlords that do remain in the market, rental yields and demand remain extremely high, as rents continue to be supported by the demand-supply imbalance.
Rental market performance across the regions
The latest figures from Goodlord show a few variations in how the rental market is faring across the country. On an annual basis, the South West led the way in August with a year-on-year rent rise on 13%.
The East Midlands and the North East were also strong performers this summer, where rental growth if more than 9% over the past 12 months. While the North West saw a record-high annual rental rise in the 12 months to July, it saw much slower price growth in August.
Month-on-month, rents increased across the East Midlands, Greater London, the South East and the West Midlands.
Another important indicator of rental market performance is void periods, which is the length of time a property sits empty between tenancies. The faster a home is snapped up, the higher the appetite is in the rental market at that time.
Goodlord’s report found that average void periods increased slightly between July and August, from 11 days to 15 days – although this could be representative of a traditionally slower summer season, when people tend to move much less ahead of the September to December rush. In August last year, average void periods were 13 days.
In Greater London, where the rental market is historically extremely fast-paced, void periods got slightly shorter between July and August, from 13 days to 12 days.
Reaching peak growth?
Much will rest on the wider economic and political situation when it comes to what will happen going forward in the rental market.
For example, measures put in place to move more tenants onto the property ladder could reduce pressure on the market, as well as any changes made to entice more property investors and landlords into the buy-to-let space in order to boost supply across the rental market.
Interest rates could also be important, with the Bank of England set to make another announcement this month to reveal whether it will reduce its base rate, which tends to improve mortgage affordability and encourage more first-time buyers.
William Reeve, chief executive of Goodlord, said: “Rental cost figures from the last two months closely mirror the trends we saw in 2023; a big surge upwards in July, with August figures dipping slightly but staying very high overall.
“Rents are now up 7% year-on-year, but salaries have only recorded a 1% uplift across the same time period: this is really putting the squeeze on tenants, with many likely to be facing affordability issues when they come to renew or take out a new lease.
“With interest rates starting to drop and tenant incomes failing to keep pace with rents, there’s a strong argument that we may be nearing a sustainability ceiling on the cost of rent. If they escalate any further, prices will prove simply unaffordable for renters – unlocking a challenging new chapter in the housing crunch.”
