The impact of the lettings market boom on rental prices and yields in the UK

The UK lettings market has experienced a significant boom in recent years, with more and more people choosing to rent rather than buy. This trend has been driven by a range of factors, including high property prices, tighter lending criteria, and a growing number of young professionals prioritising flexibility over homeownership. As a result, rental prices have been rising steadily, and yields for landlords have been increasing too. In this article, we will explore the impact of the lettings market boom on rental prices and yields in the UK. 

Impact on rental prices

According to data from Zoopla, the average monthly rent for a UK property rose by 2.3% in 2021, reaching a new high of £990 per month. This has been driven by a shortage of rental properties available, as more people choose to rent rather than buy. This increase has led to increased competition for properties, with tenants willing to pay higher rents to secure a desirable home, as per letting agents in Maidstone.

Another factor driving up rental prices is the cost of maintaining rental properties. Landlords have faced a range of new regulations and requirements, including the need to improve energy efficiency and comply with new safety standards. These costs have been passed on to tenants in the form of higher freshersweb.com rents.

According to research from the Joseph Rowntree Foundation, the number of private renters in poverty has more than doubled since 2008, with many people struggling to afford their rent each month. This is particularly challenging for those on lower incomes or those with multiple dependents.

The rising rental prices have also made it increasingly difficult for people to save for a deposit to buy their own home. According to a report by Santander, the average renter in the UK will spend over £110,000 on rent by the time they are 40. This makes it harder for people to save for a deposit, which can be a barrier to homeownership.

Impact on yields

The lettings market boom has had a significant impact on rental yields across the UK. One of the main drivers of this impact is the increasing demand for rental properties. As more people opt to rent rather than buy, the demand for rental properties has risen sharply. This increase in demand has led to a rise in rental prices, which has, in turn, increased rental yields for landlords.

According to data from Your Move, the average rental yield in the UK rose from 4.3% in 2019 to 4.7% in 2021. This increase has been driven by rising rental prices, which have outpaced the cost of owning and maintaining rental properties.

Higher yields have been particularly noticeable in areas with high demand for rental properties. In London, for example, yields rose from 3.3% in 2019 to 3.6% in 2021, despite the fact that rental prices also increased. This suggests that landlords in the capital have been able to command higher rents without losing tenants, resulting in increased profits.

Another factor contributing to the impact of the lettings market boom on rental yields is the shift towards longer-term tenancies. With the rise in demand for rental properties, landlords are increasingly opting for longer-term tenancies. Longer-term tenancies provide greater stability for landlords and allow them to plan their rental income more effectively. This increased stability has resulted in landlords being able to charge higher rents, leading to an increase in rental yields.

Moreover, the pandemic has resulted in an increase in arrears and void periods, which has further impacted rental yields for landlords. With more tenants struggling to pay their rent, landlords are finding it increasingly difficult to maintain their rental income, leading to a fall in rental yields.

Conclusion

For one, the lettings market boom has made homeownership increasingly difficult for many people, particularly those on lower incomes or without substantial savings. This has led to concerns about the long-term stability of the housing market, as the pool of potential buyers shrinks.

On the other hand, this boom has also made property investment more attractive to many people. With rental prices and yields both on the rise, more and more individuals are turning to property as a way to generate a steady income stream. This has led to increased competition for rental properties, further driving up prices and yields.

CATEGORIES