UK Rental Market Witnesses Largest Supply Increase in 12 months

Key Highlights:

• In the UK, tenants saw a 5.0% increase in private rental prices over the 12 months leading to May 2023, up from the previous 4.8% recorded in April 2023.
• Annual private rental prices rose by 4.9% in England, 5.0% in Wales, and 5.4% in Scotland during the same 12-month period ending in May 2023.
• Within England, the West Midlands experienced the highest annual rental price growth at 5.2%, while the North East had the lowest increase at 4.3%.
• London's annual rental prices showed a 5.1% increase in the 12 months to May 2023, marking its highest annual rate since October 2012.

Detailed Insights:

Private rental prices in the UK have surged by 5.0% over the past year, marking the largest annual growth rate since the series began in January 2016. This growth trend started in the latter half of 2021, with annual growth affecting all regions except London, which experienced a slight decrease. Throughout 2022 and early 2023, rental prices consistently rose across all regions, including London, where it reached 5.1% in the year leading to May 2023, its highest rate since October 2012.

The Royal Institution of Chartered Surveyors (RICS) reported in their May 2023 UK Residential Market Survey that tenant demand has increased while new landlord instructions have declined. Moreover, there's been a rise in buy-to-let landlords looking to sell their properties, coupled with reduced interest from both UK-based and overseas buy-to-let investors. These factors have created a supply-demand mismatch, and RICS predicts further rental price increases in the near future.

It's important to note that supply and demand dynamics take some time to reflect in the Index of Private Housing Rental Prices (IPHRP) as it encompasses price changes for all private rental properties, not just newly advertised ones.

Regional Insights:

• In England, private rental prices increased by 4.9% in the year to May 2023. Excluding London, the increase was 4.7%, marking the highest annual changes since the series began in January 2006.
  
  
• Wales witnessed a 5.0% increase in private rental prices in the 12 months to May 2023, the highest rate since January 2010.
  
  
• Scotland recorded a 5.4% increase in rental prices in the same period, reaching its highest level since January 2012. Scotland's rental sector has been affected by the Cost of Living (Tenant Protection) Scotland Bill, which capped mid-tenancy rent increases until March 2023 and was subsequently raised to 3% from April 2023.
  This has influenced the inflation rate in Scotland's rental market.
  
  
  Northern Ireland, on the other hand, experienced the highest increase in private rental prices, at 10.0% in the 12 months to March 2023, surpassing other UK countries. However, data for Northern Ireland lags behind the rest of the UK and will be updated in the next Index of Private Housing Rental Prices, UK bulletin, to be published on 19 July 2023.

Important Notes:

• The data presented are classified as Experimental Statistics.
  
  
• Northern Ireland data are currently available up to March 2023, with updated data expected on 19 July 2023.
  
  
• The Cost of Living (Tenant Protection) Scotland Bill has impacted Scotland's rental market, with rent increase caps during certain periods.
  
  
• The IPHRP methodology may lead to higher estimates of rising rental costs in Scotland due to data sources and assumptions.

 

These insights are crucial for understanding the evolving landscape of rental prices in the UK, which is influenced by various economic and legislative factors. It's worth noting that the IPHRP provides valuable information for tenants, landlords, and policymakers, despite some limitations, and further improvements in data reporting are anticipated in the future.