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A Complete Guide to the UK Rental Market in 2020

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    What You Need to Know About the UK Rental Market

    In a year like no other, the UK housing rental market has changed a lot over the past 12 months.

    From surviving a national lockdown and several local lockdowns, to adapting to social distancing measures, the UK rental market in 2020 has faced severe problems and has come out the other side strong and stable.

    While it is currently thriving, the market has battled through a long journey to get here, and with so much uncertainty about what the future will hold, both seasoned and inexperienced investors may continue to be confused about the current rental market UK trends.

    If you are asking “Is now a good time to invest?” and want to learn more about UK rental market trends and UK rental market statistics, then this is the guide for you.

    Here we will give you a complete breakdown of the UK housing rental market in 2020, show how it compares to previous years, and see if anyone could have predicted the changes the industry would see this year.

    Check out our 2020 property market roundup to learn more about what happened to UK property in 2020.

    For the latest on the property market, read our 2023 guide to UK House Prices.

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      Q1 2020: Rental Market UK Recovered Well After Initial Covid Decline

      The first quarter of 2020 was troubling for many people.

      As lockdown was implemented across the nation and people started to adapt to working from home, the UK housing rental market saw a decrease in demand.

      The Rental Market Report for Q1 2020, created by Hometrack, found that there was a 57% fall in demand for rental housing in the two weeks leading to March 30.

      Similarly, online visits and engagements by house hunters dropped by 4.1% between January and May.

      Research from Spotahome found that the UK experienced the eighth largest decline in online property market activity out of 28 European countries.

      While this was to be expected, the lettings industry was able to show its resilience and instantly bounced back soon after this initial dip, with a 30% surge in the first two weeks of April.

      This bounce-back was certainly positive, but numbers remained negative, with rental demand 42% lower than at the start of March.

      The report by Hometrack predicted activity levels would eventually rise again and would likely match the levels in previous years, particularly in Q3 and Q4, but overall, the total number of moves within the rental sector would likely be 25% lower than in 2019.

      Negative impacts were always going to be inevitable when such a major event occurred.

      Luckily though, the UK rental market is incredibly flexible, and it allowed the industry to survive lockdown, when so many industries crumbled.

      Agents were able to carry on dealing with tenants during lockdown by agreeing rental contracts with delayed start dates.

      Also, investment companies like ourselves here at RWInvest implemented VR technology, which allowed investors to virtually view properties from the comfort of their own home.

      In the rental market, UK landlords also began increasing the supply of properties.

      With restrictions on travel, both internationally and domestically, holiday homeowners based in the UK started to switch their properties from the short-let market to the long-let.

      Since this initial boost though, the report found that the total number of properties listed was, for the most part, unchanged since the start of lockdown.

      There was only a 3% decrease in properties available compared to the beginning of March.

      While demand dipped, the annual rate of UK rental growth also flattened, although, the Rental Market Report attributed this to seasonal trends rather than being symptomatic of the coronavirus lockdown.

      Figures showed rents were up 2.4% on the year, which was in fact higher than the 2.3% recorded in December 2019.

      These figures support a wider trend in the market, with an upwards trajectory in rent growth since March 2017.

      Despite people working from home and some being made redundant, the properties tenants were engaging with more online were properties falling in the £500-£600 pcm range, which was a trend seen before coronavirus.

      While there were some negatives caused by the lockdown, figures began to improve as the year went on.

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      Market Continued Its Growth in Q2

      Fast-forwarding to Q2 2020, the country began to emerge out of stringent lockdown laws.

      This led to another fluctuation in the market, but overall, UK rental market trends were showing positive signs.

      In what would be music to the ears of investors, UK rental market statistics were seeing serious growth.

      Average rents across the UK increased by 2.2% in Q2.

      Rental demand in the UK had also increased, hitting 33% higher than pre-lockdown. The demand was 25% above 2019 levels.

      This boost has been attributed to a change in the habits and desires of tenants.

      Several studies were conducted, with all finding significant changes in the priorities of tenants.

      Property company Rightmove found that 37% of residents want space to work from home, 35% want fast broadband, and 31% want a garden.

      With these changes in desires, renters may have reassessed their homes and decided to move out, perhaps explaining the increase in demand.

      Although in Q1 the market noticed a dip in available properties, these figures reversed in Q2.

      The number of homes for rent increased ahead of seasonal trends, with a national increase of 7%.


      UK Rental Market Statistics Point to Full Recovery

      In the rental market, UK statistics showed that fortunes in the industry were quickly starting to reverse at the end of Q2, and fast forward to the present day, the market seems to be booming.

      In July 2020, a report from Savills noticed a significant increase of 60% in new applicants registering in prime rental markets compared to the 12 weeks prior to the March lockdown.

      Landlords, in general, have emerged from lockdown with their eyes on expansion, with Rightmove finding one in six considering this move.

      Many would attribute this to the stamp duty holiday announced by Chancellor Rishi Sunak.

      Those who purchase property in the UK pay a tax called Stamp Duty Land tax.

      After this holiday though, those buying a second home under £500,000 would no longer pay any stamp duty.

      For buy to let investors though, it meant that they would pay reduced tax rates of 3% on a property up to £500,000.

      This gave investors, on average, £4,500 in savings.

      The UK market has recovered far better than many could anticipate.

      The number of homes let between May and September was up by 1.3% in the 10% wealthiest neighbourhoods compared to the same period in 2019.

      The property market has recovered so well in fact that Savills updated its industry-renowned five-year house price forecast.

      The property company has predicted a national growth in house prices of 20% by 2024. This is 5% higher than its original estimation.

      Property prices are already reaching sizeable figures.

      The Guardian reported that the average UK house price rose by 5% in September compared with the same month in 2019.

      The average price now sits at £226,129, which is a record high.

      Prices rose by 0.9% month on month in September, after a 2% jump in August after activity surged.

      Records have continuously been broken this year, with Rightmove finding that asking rent outside of London hit a record of £845 in July, 3.4% higher than July 2019.

      Overall, all numbers seem to be increasing towards the latter end of 2020.

      It seems now is the perfect time to get involved with buy to let property investment.

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      How UK Rental Market 2020 Compares to 2019 Predictions

      In 2019, with Brexit set to be implemented in 2020, property analysts were uncertain about what the future would hold for the UK rental market in 2020.

      Despite coronavirus rocking the globe, many predictions were exceeded, with some, of course, being negatively impacted by Covid.

      Leaders UK outlined several predictions for the 2020 property market.

      Firstly, for lettings and landlords, they stated that in a recent survey, 92% of landlords wanted to retain or expand their portfolio.

      Of course, with the unprecedented impact of Covid, the confidence of landlords was certainly hit.

      The latest figures outlined earlier indicate that one in six landlords are now considering portfolio expansion.

      It’s likely confidence will increase once again when the world returns to normality.

      Capital Economics, a research consultancy based in London, also produced several predictions.

      They estimated that interest rates were likely to remain similar to 2019.

      This didn’t come to fruition, however.

      After two successive cuts in March, the Bank of England cut rates to an all time low of 0.1%.

      This was a positive for many investors, with lenders offering incredibly competitive buy-to-let mortgage rates.

      PricewaterhouseCoopers, or PwC, also provided forecasts which proved incorrect.

      There were expectations that property prices would rise by 2.1% in 2020 and 3% in 2021.

      Savills five-year house price prediction was revised in early 2021 and completely blows these numbers out of the water.

      With a 4% increase predicted overall in the UK, the company predicts a 21.1% increase by 2025.

      Similarly, other industry leaders like Zoopla and Rightmove also made house price predictions.

      Zoopla estimated that London prices will rise by 2% over the year and that Northern cities would benefit more than those in the south.

      While the latter aspect is certainly true, Zoopla’s prediction about London house prices was fractionally off, with The Week reporting that house prices in London would end the year with an overall predicted increase of 2.5%.

      Rightmove were more hesitant in their predictions and believed there would be a more modest increase of 1% in southern regions.

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      London Rental Market vs North West

      The London rental market has had an incredibly turbulent year.

      With international travel all but eliminated during lockdown, and the amount people can afford decreasing, the London rental market has been hit hard.

      In Q1 2020, London saw a decrease in price demand.

      In February, the greatest interest generated online were properties priced in the £1,400 to £1,500 per calendar month range.

      Fast forward by two months to April, with lockdown in full effect, and the average price that generated interest sat between £1,200 to £1,300.

      While this was only a marginal shift, the impact of lockdown on affordability can be clearly seen.

      A negative impact was also felt in rental growth.

      The annual rental growth in London was running at 1.7%, which was down from 2.3% in the previous quarter, according to Hometrack.

      In fact, for the first time in 12 months, London’s rate of rental growth had fallen behind the rest of the UK.

      The average rent in London sits at a staggering £1,603, which is a mammoth 95.2% higher than the average for the rest of the UK, according to HomeLet’s Rental Index.

      With an increase in redundancies, rental affordability has no doubt limited the rate in which rent is growing, and with considerable rent costs in London, it’s understandable why these rental market statistics in the UK are occurring.

      In Q2, the numbers were similarly negative for the London rental market.

      Hometrack found a two-speed market was starting to occur with the rest of the country thriving and London falling behind.

      Rightmove found in July that rent prices in the capital fell by 0.6% over the year.

      One aspect that was growing in London was the amount of properties becoming available in the market.

      The Guardian reported a stock level increase of 41%. This growth has been caused by several Covid-related factors.

      Firstly, as mentioned earlier, the lack of international travel and the tourism it brings has meant that landlords who offer short-let holiday homes have been left out of pocket.

      This has led them to place their properties on the long-let market.

      Another important factor is the increase in home working.

      With more people working at home and more people avoiding busy city centre environments, the demand for property in London has fallen.

      This has led to a surplus in supply without the demand to back it up.

      The average rent cost was also impacted in Q2.

      With a 3% fall in average rent, the London rental market has now fallen into negative territory twice in the last three years.

      While this dip is happening in London, other areas, such as the North West, are currently thriving.

      The North West has started to thrive in recent years.

      After decades of decline, with the area focused on a failing manufacturing industry, the region has started to see a wealth of investment which has resulted in both Liverpool and Manchester becoming some of the best places to invest in property.

      Despite lockdown’s inevitable impact on life and the rental market, UK rental market trends and UK rental market statistics are undoubtedly positive in Liverpool and Manchester.

      While London was hit by negative rental growth in Q2, the North West posted one of the highest rates of average rental growth at 2.4% in August. Manchester recorded a growth rate of 1.4%.

      While these numbers aren’t mind-blowing, it goes to show how resilient Liverpool and Manchester’s rental markets are when they are vastly outperforming the capital.

      UK rental market trends all point to the fact that the North West is the place to be for buy to let investing.

      The average rent in the UK, as of August, was sitting at £965 according to HomeLet – an increase of 0.6% compared to 2019.

      While the UK saw some positive growth, the growth in the North West was particularly impressive.

      The rental rise in the North West hit 6.5% in August, with the average rent reaching £773.

      Comparing this with other areas in the UK, the South West saw a 2.5% increase and Scotland hit a 1.9% growth.

      Fast forward to October, and this growth has still been maintained.

      The North West has seen over a 5% increase in average rental values compared to October 2019.

      While the average rent prices in the North West are lower than the national average, it does show how fast the North West is growing and becoming an economic powerhouse.

      As mentioned earlier, the supply in London has started to far exceed the rate of demand.

      However, this seems to not be an issue in the North West and for the rest of the country.

      In Manchester, the gap between supply and demand has remained wide.

      According to a Zoopla report, demand across the UK reached a 78% increase compared to 2019, no doubt caused by the desire to switch homes post lockdown.

      This was especially seen in Manchester, with the same report finding that the ratio between available rental supply versus demand was approximately 1:5.

      It’s clear to see why, in the rental market, UK landlords are flocking to the North West to invest.

      This increase in demand has led to an increase in house prices, with the already mentioned five-year house price prediction from Savills expecting a 21.1% increase in house prices over the next four years.

      The North West will see a substantial growth, with a predicted increase of over 28.8%.

      The rate of growth in the North West seems to be far exceeding any other location in the UK.

      In 2020, the price of housing is set to increase by 3.9% in the area.

      This is higher than London (3.7%), the North East (0.3%) and the South West (1.3%) for example.

      Over the next few years, these numbers are set to continue to rise.

      In 2023, Savills predicts an 11.7& increase by 2027.

      Overall, UK house prices are rising at the fastest rate since 2016, according to the Guardian.

      Now seems like an excellent time to get involved in property investment in the UK, in particular Liverpool and Manchester.

      The latter city was voted the best UK city to live in, according to the Global Liveability Survey.

      The survey scores 140 cities worldwide based on healthcare, culture, education, stability and infrastructure.

      While tenants certainly love living in the North West, investors, too, find the area ideal as it offers some seriously impressive rental yields.

      For beginners who may be asking, “what is a good rental yield?” or may be confused about what rental yield is, rental yield is the percentage of return on investment that an investor receives through rental income.

      Anything above 5 or 6% is considered good.

      In Liverpool and Manchester, you can find some of the highest rates.

      Liverpool property investment boasts some of the highest yields in the country at 10%, which is one of many reasons investors are asking “why invest in Liverpool property?”

      Likewise, Manchester is also booming, with yields of over 7%.

      These are both higher than London, which has a high of 6.4%.

      Coupling that with affordable house prices, it seems the North West is the ideal spot for investors.

      Overall, the UK rental market in 2020 is set to finish strongly after a chaotic year.

      The average rent in the UK is now £974, which is up 2.2% on last year.

      With London excluded, the average rent in the UK is up 4.2% on last year, at £821.

      A typical rent increase is usually around 3 to 5% annually.

      In terms of how many people are renting, as of April 2020, about one in five UK households live in private rented accommodation, which is around 4.5 million families.

      London seems to have suffered the most in the rental market, with a 3% decrease in rental price, which is the second time it has entered negative growth in three years.

      The North West, on the other hand, has experienced excellent growth.

      Rent rose in the North West by 6.5% in August, with the average rent reaching £773.

      Now seems to be an excellent time to invest despite many people thinking the UK housing rental market was set to crash.

      Nationwide, experts believe the UK housing market will flourish.

      Savills believes the price of UK houses will increase by over 20% in the next four years, showing the UK housing rental market is safe, and still an excellent investment for the foreseeable future.

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        Explore the UK Rental Market With RWinvest

        If you want to get involved in buy-to-let investing, RWInvest is the company for you.

        We are an award-winning market leader in UK property investment with over 17 years’ experience.

        If the Liverpool and Manchester market’s growth gets you excited, we have excellent state-of-the-art properties ready for investment.

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        Contact our specialist and expert sales team today to learn more. We also have other informative guides and content for you to read, including our guide on the London rental market and what’s happening in 2024.

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        Dale Barham

        Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.


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