Residential rental market in the UK - statistics & facts
The UK is among the European countries with the highest share of the population living in a rental home, a result of a mature and highly competitive housing market. Out of approximately 24.4 million households, over one-third were private or social renters. While the proportion of renters has remained relatively stable, renting from a private landlord has become more common than from a local authority or a housing association. Over the past 20 years, the residential rental market has tripled, with the average rent soaring since the COVID-19 pandemic. According to a January 2024 forecast, rents will continue to rise until 2028, though slower. With many people unable to buy a home due to the lack of affordable housing and the soaring mortgage interest rates, demand for rental housing is expected to remain strong.
The UK residential rental market is experiencing significant growth, but also major challenges. Soaring rents have significantly impacted Brits’ cost of living and the ability to save. Meanwhile, landlords must adapt to a changing tax environment and market conditions.
The cost of renting
Rents in the UK have continuously increased over the last decade, with growth accelerating since 2021. In March 2024, the Index of Private Housing Rental Prices (IPHRP) rose by 9.2 percent, which was the highest increase on record. Property prices grew even faster, resulting in a narrowing gap between the cost of buying a house and the cost of renting one. While in 2013, the average monthly rental payment was 692 British pounds, in 2023, this figure had risen to 1,260 British pounds. Homebuyer costs increased from 581 British pounds in 2013 to 1,260 British pounds in 2023, respectively. Both rents and house prices have grown faster than wages, meaning Brits have spent an increasing share of their income on housing. That is especially problematic for those eager to get on the property ladder, as rising rents affect households’ ability to save up for a deposit. In July 2024, the rent-to-income ratio in most of the UK’s regions exceeded 30 percent.Private landlords in the UK
The market has also undergone major transformations for landlords. Since April 2017, tax changes on buy-to-let have been in place, meaning landlords can no longer deduct costs such as mortgage interest from their rental income. Starting in April 2020, landlords were eligible for 20 percent tax relief on mortgage payments instead. This has led to a steady increase in buy-to-let limited company incorporations. Another trend is that landlords increasingly plan to sell properties from their portfolios. While the ones who obtained a property more recently may sell because of lower profitability following the tax changes and the rise in mortgage interest rates, a considerable share of landlords sell because they are nearing retirement. These landlords bought the property in the early years of the buy-to-let scheme and have seen substantial property value growth.The UK residential rental market is experiencing significant growth, but also major challenges. Soaring rents have significantly impacted Brits’ cost of living and the ability to save. Meanwhile, landlords must adapt to a changing tax environment and market conditions.
