Will rents keep on rising at the current rate? Will more homes become available for renters next year?

Our rental market analysis will guide you to how we see the rental market shaping up next year!

Over the last year, rents have risen over 12.1% on new lettings, which equates to circa £117 per month. This increase is above the rate at which wages have increased by 6% on average.

New lettings count for 25% of the rental market, with the remaining 75% of renters staying in the same home. Renters who remained in the same home have seen a less bleak picture, with rents rising an average of 3.8% over the last year, according to the Office of National Statistics.

Rent rises reflect the increase in property prices seen over the last two years, and are expected to continue, even if property prices are starting to slow down.

The rental market is facing the supply and demand scenario seen during the lockdown, when property prices reached new heights.

Rental demand has gone up by 46% with supply decreasing by as much as 38%, causing rental prices to upsurge. Another reason for rental prices continuing to rise, is the aggravation caused by the increase in mortgage rates, causing potential first-time buyers to continue to rent for the time being.

High property prices also mean that first-time buyers need a much larger deposit than what they had initially planned for, causing them to carry on renting for the time being.

But there is a limit to what renters can afford to pay, and this may likely have an impact on demand and the pace at which rents will continue to rise in 2023. The cost of living and continued rental rises is a concern for private renters.

Slowing down inflation should boost the rental supply. However, we are not expecting this to happen over the next 12 months. New policies, regulations and tax changes affecting landlords over the past few years, have seen some landlords sell their property investment, holding the average number of homes available to rent to remain around the 5.5m mark.

The reduction of landlords in this sector has somewhat been offset by corporate investors who are building ‘build-to-rent’ homes, assisting in keeping the overall supply of rental accommodation at a similar level since 2016.

It’s important that policymakers encourage good landlords to remain in the property market and to promote them to continue to grow their property portfolios. An increase in investment in this sector will create more supply, in turn helping rent rise to increase at a slower pace, rather than the 12.1% currently seen.  

We do expect to see a modest improvement in rental supply in the coming months. 

In fact, the number of homes available for rent has increased in recent weeks as the sales market weakens. 

Landlords looking to sell homes may now continue to rent them out while uncertainty in the wider sales market persists.