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.