This is a review of the 2021 Property Rental Market and factors that are likely to affect 2022.
The figures are taken from the latest Zoopla report published on the 9th February 2022.
Supply and Demand
Demand for rental properties still continues to outstrip supply, which, combined with the surge in property prices, means that rents are still rising. This Zoopla chart clearly demonstrates the stark contrast between supply and demand.
Average UK rents
The average UK rent rose by 8.3% in 2021. This means that rents across the UK is now £969pcm. The South West is £897 which is a 9.5% annual increase. Average rents are now £62pcm higher than at the start of the pandemic. However, there’s also a very strong upward trend in London, which will have affected the averages as you can see below:
The growth is still being driven by demand. However, the demand appears to be shifting back towards city centres, as employees start to go back to office working once more.
How do these rent increases affect Rent Affordability
This increase in rents has naturally had an impact on affordability, although interestingly they still remain close to the longer run averages. Over the past 10 years rent for a single earner has accounted for 36% of their earnings. In December 2021 this was 37%. This means that technically there is still the possibility that rental income could continue to grow before affordability becomes too stretched. Although there are pockets around the country created by an even greater supply and demand gap where its looking like this pain is already being felt, as we’re seeing here in West Cornwall.
Outside influencers on Rent Affordability
Being close to the top of the affordability scale, means that it might only take one or two other economic factors to tip the balance. So the rising fuel costs and interest rate rises, may be the tipping point. Its certainly going to be a challenging year for many households. With those on lower incomes and less ability to make economies elsewhere, struggling the most.
Therefore whilst demand continues to outstrip supply, it might be wise for current and future landlords to consider the overall affordability of the local market when setting their rental requirements. It might be worth reviewing your rental yield, should additional economic factors start to force down rental prices.
Rental Yeild Calculator
As well as understanding your rental yield based on current market rates, it would be wise to consider both higher and lower yields.
2022 Rental Market Outlook
The Zoopla analysis is that renters are more likely to stay put in 2022. We’re certainly seeing that trend here at CAM. This is a good thing for everyone. Landlords will have the security of continued rental revenues, with less void periods. Then less demand, means that rental prices will grow at a more realistic rate for tenants. The projection is for a UK growth of 4.5% and removing the London factor, 3.5% for new tenancies.
About the Author
Hi, I’m Deborah and I’m one of the directors of CAM Residential Lettings in Hayle and this blog is a bit of a hobby of mine.
I love all things to do with the UK property market (useful considering the industry I’m in!). My articles are mainly about the Penwith property market. However, from time to time I’ll give you a quick update about UK property market overall.
I have in the past also highlighted what I consider to be great local investment opportunities but these have been scarce for the past few months. I’m hopeful that I’ll be able to bring you some great opportunities in 2022.
Data Source: Zoopla published 9th February 2022