Property Investors: UK Rents Will Rise by 16% by 2030

Apr 9, 2024

Recent trends indicate that rent prices in the UK are escalating due to increased inflation and interest rates. Consequently, with more people seeking rental properties, landlords are compelled to raise rents to offset their larger mortgage payments. Furthermore, as the UK’s economy improves, rent prices are anticipated to continue rising for the next five to six years. This scenario bodes well for individuals looking at property investment in the UK.

Key Takeaways

 

  • Rental Demand Boost: Rising demand for rentals drives up fees, benefiting investors.
  • Economic Recovery Effects: The UK’s recovery boosts the property market for investors.
  • Growth Forecast: Expect a 16% rent increase over the next decade in the UK.
  • Strategic Planning Needed: Investors need careful planning to profit from the growing rental market.

 

Projected Rental Growth

 

Zero Deposit’s study expects a 16% rise in rent each month by 2030, with average costs for renters possibly jumping to £1,150 a month. Some areas might see even bigger increases, up to 39%, making monthly rent go up by hundreds of pounds. These guesses are made by looking closely at past numbers from the Office for National Statistics for each area in England, predicting future rent prices in 2030 from old market trends.

Current Rental Market Trends

 

Right now, the average person renting a home in England pays £994 every month, which is 5% more than last year. Over the past ten years, this amount has jumped by 37%. London is the most expensive, with renters paying an average of £1,873 each month, a big 12% increase in just a year. Looking at the whole UK, the rent has gone up by 9% in the past year, with people paying around £1,200 every month on average. This cost changes a lot depending on where you are, from £672 in the North East to £2,128 in London. This presents diverse opportunities and challenges for property investors.

Drivers of Rental Price Increases

 

The increase in rental prices is mainly due to a constant gap between how many people want homes and how many homes are available, especially in big cities. This gap happens when more people are looking for places to live than there are new homes being made available. For example, Manchester is becoming more popular, but there aren’t enough new homes being added. Because of this, landlords can raise rents without losing tenants, leading to higher profits.

Factors Contributing to High Rental Yields in 2024

 

According to our research, the key factors contributing to high rental yields in the UK in 2024 are:

Affordability

Cities in the North and Midlands, such as Manchester, Liverpool, and Birmingham, generally have more affordable property prices compared to London and the South East. Consequently, this allows for higher rental yields.

Strong Rental Demand

Growing populations, especially those of young professionals and students, are driving high rental demand in cities such as Manchester, Nottingham, and Leeds. Additionally, the cost-of-living crisis and higher mortgage rates are keeping more people in the rental market for longer periods.

Economic Growth and Regeneration

Major regeneration projects, coupled with strong economic growth in cities such as Liverpool, Manchester, and Birmingham, are making them increasingly desirable places to live and work. Consequently, this is boosting rental demand.

Low Vacancy Rates

Cities with low proportions of vacant rental properties, such as Manchester and Coventry, are seeing higher occupancy rates and rental yields.

High Rental Prices

Rents have been rising rapidly in many UK cities, particularly in the North, allowing landlords to achieve higher yields.

The search results indicate that the combination of affordable property prices, strong rental demand, economic growth, and low vacancy rates in regional UK cities are the key factors driving the highest rental yields in 2024.

Expert Insights and Market Outlook

 

Sam Reynolds, the boss of Zero Deposit, first talked about how rising rent costs are making things tough for people who rent homes. He pointed out that rents are going up much faster than people’s pay. Even though at first there were worries about not having enough houses available, there’s been more buying and selling activity in the UK’s housing market as of 2024. Also, because mortgage rates and inflation are going down, more people are able to buy homes. This situation might attract investors who want to rent out properties, expecting that rents will keep going up a lot by 2030.

Top Rental Yield Locations in the UK for 2024

 

The landscape of the UK’s property investment is rapidly evolving, with certain regions standing out as top contenders for achieving outstanding rental yields. Here’s a glance at the cities that are capturing investors’ attention for 2024:

  • Manchester: A beacon for property investment, Manchester boasts average rental yields of 5-9%, the highest outside of London. The city’s rental market is flourishing, underpinned by robust demand and consistent rental growth.
  • Nottingham: Home to vibrant student and young professional populations, Nottingham presents promising prospects with average rental yields around 6%. Specific areas like NG7 and NG1 even see yields soaring to 12%.
  • Glasgow: Scotland’s bustling city is not far behind, offering average rental yields of 7.25%. Its performance as a top rental market in the UK is undeniable.
  • Liverpool: Fueled by affordable property prices and high rental demand, Liverpool enjoys average rental yields of about 6.2%, making it a lucrative option for investors.
  • Birmingham: With a diverse economy and ongoing major developments, Birmingham attracts a wide tenant demographic, offering average rental yields of 6.3%.
  • Leeds: Boasting rental yields up to 9.5% in areas like LS4, Leeds benefits from a strengthening economy and an expanding population.
  • Newcastle: The postcodes NE4 and NE6 in Newcastle have achieved rental yields over 10%, positioning the city among the top locations for property investment.
  • Sunderland: Notably, the SR1 postcode in Sunderland showcases a rental yield of 10.8%, one of the highest in the country.

 

Conclusion

 

The growing chances to earn from renting out properties in the UK’s north, especially the North West and North East, offer a great chance for property investors in 2024. This is because properties are affordable, there’s a high demand for rentals, and the economy is growing. Investors can gain a lot. Also, making smart plans and really understanding the market are crucial for making the most of this trend. This helps in making smart choices and successfully dealing with the changing property market.

FAQs

 

What makes Manchester a prime location for property investment with high rental yields?

Manchester’s attractiveness lies in its robust demand driven by significant economic growth, a flourishing job market, and an influx of young professionals and students. Combined with comparatively affordable property prices, these factors contribute to the city’s high rental yields.

How have the economic conditions affected the UK rental market?

The economic conditions, including the cost-of-living crisis and higher mortgage rates, have led to an increased population staying within the rental market for longer periods. This heightened demand contributes to rising rental prices, especially in cities outside London.

Why are property investors increasingly looking towards regional UK cities?

Investors are drawn to regional UK cities due to the combination of more affordable property prices, high rental demand, strong economic and regeneration projects, and lower vacancy rates. These factors together allow for higher rental yields compared to more traditional areas like London.

What strategies can investors employ to succeed in the UK’s changing property market?

Success requires thorough market research, understanding regional dynamics, focusing on cities with high rental demands, and staying informed about economic developments. Additionally, adopting a long-term view and being prepared for market fluctuations can aid investors in making more informed decisions.

DISCLAIMER

This guide is intended solely for informational purposes and should not be considered as investment advice. For those in search of financial guidance, it is advisable to consult with a financial advisor authorised by the FCA, to receive regulated advice tailored to your investment choices.

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