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Insight & Opinion

Demand for property pushing up rental costs

Author: Gemma

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Increasing demand for UK private residential housing is leading to growth in rental values across the country.

That’s according to new research from Sequence, with the study unsurprisingly revealing that the most prominent price rises were in London.

The cost of rental accommodation in the capital has increased by two per cent from March to April, while annual growth stands at four per cent. This means the average property is now £1,427 per month to rent out.

Elsewhere, rents across the rest of the UK have risen by one per cent in the space of 30 days, with the new average cost now £763 per month.

Furthermore, there have been 16 per cent more new tenancies agreed over the same time period, while the growth of occupancy is 20 per cent across the year.

The increased demand for property demonstrates the lack of appropriate housing supply currently available on the UK market. It also emphasises how renting is still the most suitable option for many, as funding a mortgage remains problematic.

Sequence suggests there are six prospective tenants applying for each new rental property that hits the London market. When compared to figures from March, this represents an increase of 0.9.

Landlords are seeing the opportunities that rental accommodation is providing, with an eight per cent month-on-month increase in mortgage applications and a three per cent annual rise.

This proves that buy-to-let property can be a lucrative option for investors who are turning away from savings and investment schemes offered by high street banks.

With demand still extremely high for accommodation in the capital and throughout the UK, you can expect stable returns on your investment every calendar month as it is unlikely you will have an empty property for long periods of time.

Stephen Nation, head of lettings for Sequence, said the latest figures prove the rental market is growing, with the high levels of demand for homes UK-wide stimulating the market.

“The number of new rental properties coming onto the market has failed to keep up with demand, remaining flat on the month, which is why we have seen a growth in rents,” he added.

While London is still the area with the highest rental values and demand, there are still opportunities all over the country.

Furthermore, with the Office for National Statistics (ONS) revealing that UK house prices are still accelerating, now could be the perfect time for property investment.

Not only will you benefit from a stable monthly rental income, the value of your property will also present a welcome return on the money you initially invested.

According to the ONS, prices across the UK rose by 9.1 per cent in the year up to February 2014, marking a considerable jump from the annual rate of 6.8 per cent recorded in January.

UK house prices in February were around 3.6 per cent higher than the pre-recession peak, the ONS said. In London, house prices soared by 17.7 per cent over 12 months, while the rest of the country, excluding the south-east, saw property values increase by 5.8 per cent.

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