Rents rising in most areas as high interest rates hit long-term supply

Asking rents continue to show posi­tive, albeit lower, growth in most regions according to the property website Home.

The site conducts a monthly lettings market snapshot and says that although year-on year asking rent falls are evident in Greater London, East Midlands and the West Midlands (down 1.2%, 0.6% and 0.5% respectively), there is double-digit annual growth still apparent in Scotland, Wales, Yorkshire, the South West and the North East.

On average UK asking rents are currently 2.5% above their July 2023 level.

Meanwhile in the sales market Home says overall price rises are being kept in check by high stock levels and stubbornly high mortgage costs.

However there is regional variation. While Greater London, adjacent regions and the South West remain in recovery mode, the northern, Scottish and Welsh markets have more than made up for lost ground following the shock price drop in December 2022 and continue to thrive.

Key market indicators show that, despite lacklustre performances in the southern markets, the UK property market is in much better shape overall than in 2019.

Home says this is clearly remarkable and per­haps counterintuitive given the current higher levels of stock for sale and sub­stantially higher borrowing costs.

How­ever, during the same five year period, UK rents have risen by 44.6% and this mete­oric rise has provided enormous support for the sales market. Moreover, this sup­port has a regional bias with respect to gross rental yields which are higher in the North.

The website insists that without what it calls “this vast support from the rental market” the sales market would be in a much worse state. 

Given that inflation has fallen below target, a cut in the Bank of Eng­land base rate is becoming long overdue, Home claims, adding that the wider UK economy continues to suffer while European com­petitors already benefit from the first rate cuts. 

Investment in much-needed new-builds is also being thwarted by unnecessarily high interest rates. In par­ticular, additional new energy-efficient rental stock is required to ease the short­fall of properties available to let. In July 2019, 122,000 properties were available for rent while today the total is 66,000.