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Latest Predictions for 2022 UK Rental Market

Latest Predictions for 2022 UK Rental Market

Zoopla's latest rental market quarterly review features essential information for existing and new buy to let investors. Find out where the market is now and what to expect from rent rates and demand in 2022.

UK Rental Growth 

The Zoopla report looks at the UK Rental Growth for Q4. Average rents grew by 3.7% in the last quarter of 2021, which meant that the yearly rate of UK rental growth was 8.3%. This is due to the continued rise in rental demand and shortage of supply. The average rent for the UK is now £969 per calendar month, a £62 per calendar month increase from the start of the pandemic.

London has also seen some developments, leading with the highest regional average annual rise in rental growth of 10.3%. Despite this growth, London rents are still only just above where they were before the pandemic hit and the city buzz dispersed out to the surrounding areas.  

Zoopla measures rental affordability by looking at rent as a proportion of gross income. This data for the past decade has shown rent at an average of 36% for a single earner. In December, this rose to 37%. These numbers from Zoopla suggest that we can expect to see rents increase even more before affordability becomes completely stretched. Whilst there is some flexibility for those with more disposable income to afford these rises, those on lower incomes will feel the price increase most. With a lack of market supply in rental properties, and further price increases coming in 2022 (National Insurance, energy bills, etc.), many people will be unable to accommodate further increases in their outgoings from their homes.

Demand also continues to outstrip supply, a trend that we have seen throughout the pandemic. The demand in January 2022 for rental properties was 76% higher than in the same month for the previous four years. Zoopla does report, however, that this level of demand has begun to strip back this February.

The continued increase in demand has led to sustained pressure on rents and has left many landlords considering their options and the affordability of their properties. It’s also something for landlords to think about when looking to relist buy to let properties.

Demand in the Cities

The data shows a significant change in the renewed drive in demand for properties in city centres for the past six months. This spike in demand in cities comes as the pandemic begins to ease, with offices reopening, students back on campuses, and global travel opening, leading to positive growth in demand for properties in the cities. The report shows strong annual growth in rents in the inner-city centres, and for the first time since the start of the pandemic, this growth has overtaken the rate of growth in the wider commuter zones.

The supply in the cities remains short. The second half of 2021 saw 8% of properties that were previously let out being put onto the sales market. We can understand from this that landlords are looking to seize the opportunity to profit from their investments whilst prices and demand is so high. There have also been large changes to the level of investment into the rental market over the past year, due to changes in stamp duty and increases in taxes for landlords.

Zoopla has also noted that the rise in rent for new tenancies because of the demand for properties in the cities is persuading more renters to stay put in their current homes. The impact on the market will be that it continues to reduce supply, but tenants can access a bit of security by agreeing on terms with their current landlords.

Zoopla’s forecast for 2022

From this data, Zoopla predicts that with the standard seasonal trends and renters staying put (leaving a further shortage of supply of rental properties in the market), the pace of rental growth will slow through 2022. Furthermore, Zoopla predicts a rental growth of 4.5% throughout the UK, excluding London, expected to grow 3.5%.

If you would like to discuss how to best profit from your property investments in the coming year, then submit an enquiry and one of our expert brokers will get back to you. Alternatively, give us a call on 0345 345 6788.