UK Rental Market: Rising Costs & Trends Explained

Significant Increase in UK Rental Costs Since 2021

Recent research indicates that the average annual rent for newly let homes in the UK has risen by £3,240 since 2021, reaching £15,240 in 2024—a 27% increase from £12,000 in 2021. This surge has outpaced income growth, which saw a 19% rise in the same period. The primary driver behind this trend is the heightened demand for rental properties surpassing available supply. Notably, in 2024, the growth rate slowed to 3.9%, marking the slowest pace in over three years.

Regions with traditionally high rental costs, such as London, experienced smaller increases (1.3%), whereas more affordable areas like Northern Ireland and the northeast of England saw more pronounced rises. Projections for 2025 suggest continued rental cost increases, especially in accessible regions. Despite rising rents, many private landlords have exited the market due to increased regulations and higher borrowing costs. Experts suggest that expanding housing construction could help alleviate rental market pressures.

Slowdown in UK Rental Inflation Offers Tenant Relief

The UK has seen a deceleration in rental inflation, providing some respite for tenants who have faced substantial rent hikes in recent years. Over the past year, rents have increased by 3.9%, bringing the average monthly rent to £1,270—the slowest growth rate since August 2021. Regional disparities are evident; for instance, Northern Ireland experienced a 10.5% rise, while London saw a modest 1.2% uptick. On average, tenants are now paying £3,200 more annually compared to three years ago. The persistent gap between rising demand and stagnant rental property supply since 2016 has fuelled these rent increases.

Looking ahead, rental growth is expected to continue due to the ongoing housing shortage, with anticipated increases of 4% in 2025. Areas on the outskirts of major cities, offering better value, are witnessing notable rent surges. Initiatives to build new homes aim to ease rental market pressures. The Labour party plans to construct 1.5 million homes over five years to stabilize rent and housing prices. Private landlords are encouraged to remain in the market to help address the shortage, despite facing a challenging tax and regulatory environment.

Expansion of Large Landlords in Dublin’s Rental Market

New data from the Residential Tenancies Board (RTB) reveals that landlords owning more than 100 properties now account for 22% of Dublin’s rental accommodations. This marks a steady increase in the presence of large or corporate landlords in the city. Contrary to the narrative of private landlords exiting the market, the number of registered private landlords in Ireland has risen from 96,702 at the end of June last year to 103,035 by the end of March this year, indicating a 6.5% increase.

Nationally, the proportion of tenancies associated with landlords owning more than 100 properties grew from 9.5% to 11.17% over the same period, with Dublin driving this trend. Outside Dublin, such large landlords represent just 2.56% of tenancies. The data suggests that the private rental sector is expanding, with an increasing number of registered landlords and tenancies.

Landlords Exiting the Market Constitute Significant Portion of Home Sales

A recent survey indicates that landlords leaving the market account for nearly one in four home sales over the past three months. The average house price nationally rose by 2.24% in the last quarter, a slower increase compared to earlier in the year. While investor properties are adding to supply in urban centres, selling prices in commuter areas have seen three times the growth experienced in major cities. The data also reveals a decline in demand for properties requiring renovation, attributed to rising costs of building materials and labour.

The survey highlights that 24.2% of all second-hand house sales in the past quarter were due to landlords exiting the market. This trend is particularly noticeable in urban areas, where increasing property values make selling more attractive for investors. Additionally, changing legislation in the residential rental market is deterring non-institutional landlords, potentially impacting the availability of rental properties and exerting further pressure on the rental market.

Airbnb Introduces Long-Term Rental Marketplace in the UK

Airbnb is expanding its long-term rental marketplace to the UK, allowing tenants to sublet their homes part-time to help alleviate housing shortages and high prices. Initiated in 2022 with partners such as Greystar, this scheme will launch in London, involving 1,500 flats across three properties. Tenants must sign contracts with landlords, with hosting rules and a revenue share of 10-25%. This move aims to address criticisms that platforms like Airbnb inflate rents and housing costs.

Additionally, it offers renters a way to offset living costs amid economic challenges. Like other cities facing restrictions on short-term rentals, Airbnb urges Barcelona to lift its ban, arguing insufficient housing development is a more significant factor in rising rents. Despite some regulatory setbacks, Airbnb reported growth in bookings but anticipates reduced profit margins due to increased marketing and development expenses.

Mixed Reactions to Ireland’s Recent Budget Amid Rising Living Costs

The recently proposed €10.5 billion budget in Ireland has garnered mixed reactions. The budget includes €1.4 billion in tax changes, €6.9 billion in spending, and €2.2 billion in cost-of-living measures. Despite these measures, many feel that the budget offers insufficient support given the rising costs of living, especially families and farmers facing increasing pressures.

A farmer from Tipperary and a dairyman from Kilkenny both acknowledge the benefits of the budget’s minor increases but emphasize that these adjustments fall short of addressing the significant cost spikes in their sectors.