The rental market in the UK is constantly evolving, requiring both tenants and landlords to stay informed about average rental prices and the factors that influence them. Staying updated can help landlords maximise their rental income and tenants find the best deals. This blog will provide a comprehensive overview of the current rental landscape in the UK.

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Current rental prices and trends

The average rent for new leases in the UK has risen significantly. As of early 2024, the average rent has increased to approximately £1,271 per month, which marks an 8.6% increase compared to the previous year. This translates to tenants paying an additional £101 monthly, or roughly £1,212 more annually​.

In London, the average rent is notably higher, around £2,035 per month, which reflects the highest rent inflation among the UK regions at 10.6%​ . This upward trend is driven by several factors, including rising inflation and an imbalance between tenant demand and available rental properties​.

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Average rent by region

We combined the current average monthly rents for new lets across various UK regions, along with their changes over the past year:

• London: £2,121 (4.2% increase, £90 more compared to last year)
• South East: £1,325 (8.7% increase, £110 more compared to last year)
• Eastern: £1,163 (8.4% increase, £90 more compared to last year)
• South West: £1,077 (8.2% increase, £80 more compared to last year)
• Wales: £881 (9.5% increase, £80 more compared to last year)
• East Midlands: £860 (8.7% increase, £70 more compared to last year)
• North West: £848 (9.0% increase, £70 more compared to last year)
• Scotland: £793 (9.9% increase, £70 more compared to last year)
• North East: £695 (9.9% increase, £60 more compared to last year)
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What affects rental prices in the UK?

Several factors play significant roles in influencing rental prices:

Rental supply and demand
The balance between available rentals and tenant interest is vital. When tenant demand exceeds supply, rental rates typically increase as landlords can charge more.

‍Economic influences
Growth in earnings and the robustness of the job market impact rental costs. A healthy job market with rising wages can lead to higher rental prices, as tenants can afford to pay more.

‍Mortgage rates and housing loans
Fluctuations in mortgage rates can indirectly impact rental rates. Elevated mortgage rates may discourage potential homebuyers, boosting demand for rentals and driving up rents.

‍Policies and regulations
Adjustments in housing policies, such as changes in landlord regulations or perks for new buyers, can affect rental market conditions and pricing.

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Tactics renters use to reduce rental costs

To cope with higher rents, renters are adopting various strategies:

1. Staying in current homes: Some renters avoid the rent increases by remaining in their current residences. Year-on-year rent rises for existing tenancies have increased at a slower pace, as reported by the Office for National Statistics.
2. Considering smaller homes: When faced with higher rents and limited housing availability, renters often choose smaller properties. 
3. Moving to cheaper areas: Renters explore more affordable areas where rental prices may be lower, enabling them to maintain their housing within budgetary limits.
4. House-sharing: Sharing accommodation with others is becoming a common strategy to reduce housing costs per person. However, this often means compromising on privacy and living space.

Over the past 20 years, private renters in the UK have experienced a 16% reduction in floor space per person, from 43 square meters to 36 square meters, due to rising rental prices and limited housing supply.

The UK rental market is expected to stabilize with rental inflation easing to around 5% in 2024, though affordability may not significantly improve due to slowing earnings growth and a continued lack of new rental property investments. While this slower pace of rent increases will offer some relief to tenants, the overall high rent levels will persist​.
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What to consider: Renting or buying? 

When deciding between renting and buying property in the UK, both options have their own advantages and downsides:

• Renting: Offers flexibility and avoids the financial commitments of owning real estate. It’s ideal for those who value mobility and do not want to tie themselves down with property ownership.
• Buying: Provides security and potential for capital growth, leading to long-term financial benefits, including tax advantages. However, it requires a substantial initial investment and ongoing maintenance costs. Long-term renting can be more costly compared to the stability and potential wealth accumulation of ownership.
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Conclusion

Staying informed about market trends, rental rates, and average figures in the UK rental sector is crucial for tenants and landlords alike. Understanding government regulations and leveraging the right resources helps individuals make informed housing decisions, whether renting or buying, each with its unique advantages and disadvantages. Being aware of current market dynamics ensures the best choice for your needs.

For professional insights and to discover how Smarthost can help you optimise your property's potential, explore our Airbnb calculator.

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