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Seasonality returns to UK lettings market, but demand still outstrips supply

The UK lettings market, after experiencing recent surges in prices, is now displaying signs of returning to its seasonal patterns.

The UK lettings market, after experiencing recent surges in prices, is now displaying signs of returning to its seasonal patterns. Nevertheless, it continues to face significant challenges due to the persistent imbalance between demand and supply.

Commenting on the current circumstances in the letting market, Nicky Stevenson, Managing Director of Fine & Country, says, “The return to seasonality in the UK lettings market is a positive development, as it provides more predictability for both tenants and landlords. However, we must not underestimate the ongoing challenges. The demand for rental properties still greatly surpasses supply, driving rental prices up. The average monthly rent in the UK reached a new high of £1,283 in October, according to HomeLet. While prices are on the rise, the pace of growth has slightly slowed compared to the previous year, causing the annual growth rate to dip below 10% for the first time since April.”

She notes that void periods have also lengthened, increasing from 14 to 18 days, as a sign that demand is cooling as we move into the quieter winter months. Nevertheless, demand still far outweighs supply, with 52% of agents reporting rising rents in September, though this is lower than the reported figures for July (71%) and August (68%). The market awaits further developments to ascertain if this downward trend will persist.

“Tenant demand experienced a slight dip in September, which is a common occurrence following the busy summer rental season. Propertymark reports that September witnessed 96 prospective renters registered per branch, down from 121 in August. Despite this, the supply remains constrained, with Rightmove data revealing a 35% decrease in the number of homes available to rent compared to 2019, though it is up by 14% from last year,” Stevenson comments.

Looking at the prime market, Stevenson says that average monthly rents continued to rise in October, reaching £3,845. This represents another monthly increase, with an annual growth rate of 7.6%. Rents showed an increase in all regions, and the South West saw the most robust annual growth.

On the legislation front, the government has recently announced that Section 21 ‘no-fault’ repossessions will not be abolished until “significant progress” has been made in improving the courts, news that has been welcomed by landlords. “Elements proposed include the digitisation of the court processes, which will make it easier for landlords. Certain cases will also be given priority, such as those including anti-social behaviour. The lettings sector will no doubt be keeping an eye on these developments as they unfold,” Stevenson concludes.