“A two-speed rental market is emerging” in the UK, as growth and demand falls in London but rises in most regional cities across the country.

Summary:

• New data from Britain’s rental property market shows significant differences for investments in London and the rest of the UK
• The average rental growth figure for the UK nationally doubles when you exclude the losses suffered in the country’s capital over the last 12 months
• Demand for rental property continues to outstrip supply in key regional cities such as Manchester

“A two-speed rental market is emerging” in the UK.

That’s according to the findings of the latest report from Zoopla, one of the UK’s largest property portals.

Measuring growth for the 12 months to June 2020, it found that average rents nationally had increased 1.1%. However, when excluding data from London, national growth doubles to 2.2% for the year.

That’s because rents in London over 12 months fell by 1.4%. Yet it was a different picture across the rest of the UK. In fact, no other region suffered a reduction in average rental prices.

It was a similar story when looking at supply and demand levels across the UK. London was just one of two major cities (along with Edinburgh) where the supply of rental property is currently greater than actual demand from prospective tenants.

The report suggests that average rents in London could fall by 5% this year.

Head of Research at Zoopla, Grainne Gilmore, commented on the findings: “A two-speed rental market is emerging between London and the rest of the UK, with a demand/supply imbalance supporting rental growth in many cities, while greater supply in London is putting downward pressure on rents.”

North-West England posted one of the highest rates of average rental growth (2.4%) in the last 12 months, with the region’s major city of Manchester posting positive growth of 1.4%.

Crucially, the gap between supply and demand in Manchester remains wide. A table in the Zoopla report shows that the current ratio between available rental supply in Manchester versus demand is approximately 1:5.

Continued growth in Manchester, coupled with slowdown in London, should further cement Manchester’s place as one of the strongest investment locations for rental growth in the UK.