In recent years, the UK rental market has seen significant growth, with tenants facing increasing rent prices as demand consistently outpaced supply. However, the tide appears to be turning. As an estate agent in Lancaster, I’ve observed that the pace of rental growth is now slowing, providing some relief to renters who have been feeling the squeeze.
Nationally, rental growth remains at 5.2% annually, but this figure is a marked decline from the 10.3% growth we saw just a year ago in July 2023. This nearly halved rate reflects a broader trend across the country, including here in Lancaster, where we’re seeing early signs of a shift in the rental market dynamics.
One of the key reasons for this slowdown is a softening in tenant demand. Over the past few months, leading indicators have started to reveal a cooling off in the fervor with which properties were being snapped up. At the same time, there’s been a gradual improvement in the supply of rental properties, as more homes become available and some landlords opt to re-list properties that had been taken off the market. This balance is contributing to the moderation in rental price increases.
Affordability is also playing an increasingly critical role in this market adjustment. In July, renters were paying an average of 32.7% of their income on rent. While this is still a significant portion of income, it represents a slight easing in rent burden in all but two UK regions over the last year. For many renters, especially in high-demand areas like Lancaster, this is a welcome development, providing a little more breathing room in their budgets.
Looking ahead, experts forecast that rental growth will continue to ease into 2024, more closely aligning with earnings growth. By 2028, the pace of rental growth is expected to moderate further, potentially reaching around 2.5% annually. This is good news for both renters and landlords, as it suggests a more sustainable rental market in the long term, balancing affordability with investment returns.
Do you have any questions? At JDG we look after over 300 landlords with their rental portfolios and properties to let. Can we help you? You can call me on 01524 843322 or email me at josh@co.uk.
Thanks for reading
Josh
Lettings Director