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    Rental growth rates continue to rise across the UK as the annual growth reaches 2.3%. In the three months to the end of December, average rents rose by 1.4%, excluding London.  As rates increase across the UK, London is facing a rental decline of 2.5%. Therefore, dropping the annual rate to -8.3%. The figures in London are close to those reported in 2014 and also after the Global Financial Crisis in 2008.

    Over the last 6 years, UK rental prices have increased by 10%, according to data from the Office for National Statistics – Index of Private Housing. Therefore, if you’re looking to start your journey in property investment or are already an established investor – this is a great indication of a stable and profitable long-term investment. Rental growth rates will continue to rise as the population of skilled and working professionals increases, expanding the pool of potential tenants.

    Rental Demand Increases Year-on-Year

    In comparison to January 2020, rental demand in January 2021 increased by 21%. This is a clear indication demand for rental property is on the rise. However, the supply of homes-to-let does not follow the same trend. Demand for rental properties outstrips the supply of homes available. The constrained market is showing an eleven percent decrease in supply, in comparison to the previous year. Therefore, the supply and demand imbalance is increasing rates.

    Recent data shows houses are now renting much more quickly in all cities in comparison to Q4 2019. In Manchester, houses are taking 26% less time to rent out. This is a 5-day reduction compared to the previous year.

    Regions of South West and East Midlands are performing the strongest. This is evident in the graph below, with data from the Index of Private Housing. Regions across the north are also reporting higher rental growth rates than London and the south.

    Trends are Reversed in London as Supply Outstrips Demand

    In contrast to this, in London, rental supply is much higher than the demand. The housing stock is being released back to the market in the city centre. This is primarily due to the changing working environments caused by the pandemic. As a result of more home-working, the number of people commuting has dropped. A decline in business travel and tourism because of COVID related restrictions is also a leading factor in the increase of homes-to-let available in the centre.

    Neighbouring Boroughs Performing Strongly

    Although rents are rising rapidly in well-connected areas. Many city centres across the UK are facing the strongest pressures of rental declines, in comparison to neighbouring boroughs. Boroughs outside the centre are seeing an increase in rates. This is due to the rise of home working, which means workers who would rent properties closer to their workplaces, may have relocated elsewhere on a longer-term let.

    Moving Out of the City Centre – Will the Trend Continue?

    The pandemic and lockdown restrictions have affected employment growth and migration in the city. Ultimately, this has influenced demand in the rental market. However, as the COVID19 vaccines are successfully rolling out across the nation – we may see businesses return to normal in the city centres. Causing a rise in rental demand with the reopening of retail stores and entertainment facilities. Therefore, shifting back from long-term lets to short-term lets as businesses resume.

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