UK Residential Rental Market - 2021 Review & 2022 Outlook
Steve Dunn, Director - Real Estate Team at Arbuthnot Latham, sat down with Sophy Moffat, Partner, Head of Insight & Research from Cluttons to discuss the residential rental market.
Steve Dunn, Director - Real Estate Team at Arbuthnot Latham, sat down with Sophy Moffat, Partner, Head of Insight & Research from Cluttons to discuss the residential rental market, including a review of Cluttons’ Q4 2021 data and thoughts on the outlook for 2022 as we face the multiple economic headwinds of rising taxation, interest rates and fuel costs.
Steve: Your Q3 2021 data showed continued strengthening of the rental market nationally, with high demand and low supply conditions continuing. What did the Q4 data look like in comparison?
Sophy: Demand remained high and new supply remained low in the rental market in Q4 2021, with all regions recording very strong rental growth over the full year. At a national level, annual rental growth reached 9.9% by the end of Q4 2021 according to Rightmove’s index—this is the highest ever recorded. With tenant demand up 32% compared to a year earlier, and 51% fewer properties on the market, growth is likely to continue in the short-term.
Steve: Are you seeing ‘hotspots’ of growth across the country and are any regions showing signs of a slowdown?
Sophy: The strongest annual growth last year was in London. By the close of 2021, rents in the capital, including in central areas, were above pre-pandemic levels. Tenant demand remained high and, when combined with continuing low levels of new instructions, the outlook for rental growth in London continues to be very strong. Our central London estate agencies reported an exceptionally buoyant market in Q4, with the most acute supply-demand imbalance in the £500-£2000 per week bracket, driven by returning workers. They don’t expect this balance to shift any time soon.
Steve: Your last report on available data for rent arrears was showing an improving trend after the spike through the pandemic. Is any further data available on that?
Sophy: The levels of rent arrears built up during the pandemic, which caused concern that very large numbers of evictions could take place once restrictions were lifted in May, but the Q4 data was not yet showing this. Landlord claims increased in late 2021 but remained well below typical pre-pandemic levels, at 31% of the 2015-19 average. Actual repossessions bounced back more quickly – to 4,800 or 53% of their usual level. This suggests landlords are perhaps focusing on more major breaches of tenancies.
Steve: And what’s your view on the outlook for 2022 as rising interest rates, taxation, and energy prices start to put the squeeze on spending power?
Sophy: Headline affordability metrics suggest that rents could rise more before affordability becomes very stretched. While there is flexibility in the rental market among those with greater disposable income, who can adjust their rental expectations in line with their budget, any rises in rents will be felt most keenly by those on lower incomes who have less choice in the market.
Cluttons’ Q4 2021 data can be found at: https://www.cluttons.com/insights/property-market-research/1044-uk-rental-market-q4-2021
Steve Dunn – Director – Real Estate
Steve is a qualified banker who has worked in the industry for over 35 years and has specialised in real estate finance for over 20 years. He manages clients for Arbuthnot Latham who own real estate assets across the UK.
Sophy Moffat – Partner, Head of Insight & Research
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