The UK rental market in 2024 is navigating a pivotal phase, blending slower rental inflation with persistent supply shortages and shifting tenant preferences. As the market evolves, landlords and property investors face a mix of opportunities and challenges that require strategic thinking and informed decision-making.

Whether you’re managing an existing portfolio, looking to expand your investments, or considering your next steps as a landlord, this comprehensive guide will provide a detailed view of the trends shaping the rental market today.

Rental Inflation: Slower Growth, but Still Elevated

After years of rapid increases, annual rental inflation in the UK has cooled to 5.4%, down from the peak of 10.2% recorded in 2023. While this represents a significant slowdown, it’s important to note that rental prices remain well above pre-pandemic levels.

Why Has Inflation Slowed?

1. Tenant Affordability: As rents climbed rapidly in previous years, many tenants are now reaching their affordability limits, especially in higher-cost regions like London. This has placed natural constraints on further rental growth.
2. Market Stabilisation: Following the pandemic-driven surge in demand, the market is stabilising, with more balanced competition between tenants in some areas.
3. Economic Pressures: Rising living costs and broader economic uncertainty have tempered the ability of landlords to pass on additional costs to tenants.

What to Expect Moving Forward

Rental inflation is projected to moderate further, with growth likely to settle between 3–4% by the end of 2024. For landlords, this shift emphasises the importance of retaining tenants, managing costs effectively, and focusing on long-term stability in rental income.

Regional Variations: Where Is Growth Happening?

The UK rental market is highly regional, with some areas outperforming others due to affordability, demand, and local economic conditions.

Smaller Towns and Suburban Areas Lead the Way

Tenants are increasingly looking beyond large cities for affordability, space, and value. This trend has driven stronger growth in smaller towns and suburban areas near major cities.

• West Midlands: With average monthly rents at £955, this region is outperforming the national average, reflecting robust demand and rental growth.
• Smaller Towns and Suburbs: Areas within commuting distance of employment hubs are thriving, as tenants seek more space and lower costs compared to city centres.

The Impact on Major Cities

In contrast, larger cities like London are seeing slower growth, with rental increases of just 2.5% this year. High existing rental prices have constrained further growth, leading tenants to explore more affordable options outside city boundaries.

For landlords, these regional trends present a compelling case for diversifying portfolios into high-growth, smaller towns and suburban areas where yields are higher and tenant demand is stable.

Top-Performing Rental Markets

Several areas stand out in 2024 as exceptional performers, offering strong returns for landlords and investors:

• Kilmarnock and Kirkcaldy (Scotland): Leading the UK with rental growth of 12–13%, these towns benefit from affordability and growing tenant demand.
• Wolverhampton: Rents in Wolverhampton have increased by 12% year-on-year, making it one of the strongest rental markets in the UK.
• Oldham: With an 11% rise, Oldham has become a hotspot for tenants seeking affordability and landlords looking for reliable returns.
• Darlington and Walsall: Both towns recorded rental growth of 10%, thanks to affordability, excellent transport links, and growing populations.

Weaker Rental Markets

Not all areas are seeing the same level of growth. For instance, London, with its already high rents, is facing affordability pressures that have capped growth at just 2.5%. This slower pace reflects tenants’ growing preference for more affordable and spacious options outside the capital.

For landlords in these high-cost regions, focusing on tenant retention and offering competitive rental packages may help maintain occupancy rates and long-term profitability.

Supply and Demand: A Persistent Imbalance

One of the defining challenges of the UK rental market in 2024 is the ongoing mismatch between supply and demand.

Supply Challenges

The supply of new rental properties has improved but remains 24% below pre-pandemic levels. Several factors contribute to this shortage:

• Landlord Exits: Many landlords are selling properties due to increased regulatory and financial pressures, reducing the number of homes available for rent.
• Limited New Construction: The rate of new rental home construction has not kept pace with demand, exacerbating the supply gap.

Demand Trends

While demand has cooled compared to the exceptional highs of 2022, it remains more than double pre-pandemic levels. According to Zoopla, the average rental listing receives 21 enquiries, indicating strong ongoing competition among tenants.

For landlords, this supply-demand imbalance creates opportunities to achieve strong rental values and quick lettings, particularly in high-demand areas.

Shifts in Tenant Preferences

Tenant behaviour has evolved significantly in recent years, driven by economic pressures, remote working trends, and changing lifestyle priorities.

Key Changes in Renter Behavior

1. Space and Affordability: Renters are prioritising affordability and additional living space, often choosing smaller towns or suburban areas over city centres.
2. Remote Work: The rise of hybrid and remote work models has allowed tenants to relocate further from employment hubs, opening up new areas of demand.
3. Flexible Living: Many tenants value the flexibility of renting, particularly during times of economic uncertainty, and over-committing to homeownership.

These preferences highlight the importance for landlords of targeting properties in regions with growing demand for space, affordability, and flexibility.

The Historical Perspective: A New Normal

The UK rental market has undergone dramatic changes over the past few years, shaped by the pandemic, economic fluctuations, and housing policy shifts.

• 2019: The market was relatively balanced, with fewer enquiries per property and steady rental growth.
• 2020–2022: The pandemic triggered a surge in demand, creating highly competitive conditions and driving up rents at an unprecedented pace.
• 2023–2024: The market is stabilising, with demand cooling slightly but remaining well above historical averages.

This “new normal” presents landlords with opportunities to capitalise on continued tenant demand while adapting to a more stable market environment.

Opportunities and Challenges for Landlords Opportunities

1. High-Demand Areas: Locations like Wolverhampton and Walsall offer landlords strong rental yields and minimal void periods, making them attractive investment options.
2. Affordability-Driven Growth: Smaller towns with good transport links and growing populations present excellent opportunities for new investments.
3. Portfolio Optimisation: As market conditions evolve, landlords can focus on improving yields by diversifying into high-growth regions and managing costs effectively.

Challenges

1. Supply Shortages: The lack of rental properties underscores the need for proactive tenant retention strategies and efficient property management.
2. Financial Pressures: Rising mortgage rates and increased maintenance costs require careful budgeting to maintain profitability.
3. Regulatory Changes: New legislation, such as the Renters’ Rights Bill, will demand compliance and potentially require adjustments to how landlords manage their portfolios.

Preparing for the Future: Questions Every Landlord Should Ask

To thrive in today’s rental market, landlords must approach their investments like a business. Here are some critical questions to consider:

• Are your properties located in high-demand, high-growth areas?
• Are you maximising returns while managing costs effectively?
• Are you fully compliant with current regulations?
• Are you prepared for upcoming legislative changes that might impact your portfolio?

Addressing these questions will help ensure your property investments are well-positioned for long-term success.

Final Thoughts

The UK rental market in 2024 offers a mix of opportunities and challenges for landlords and property investors. While rental inflation is slowing, demand remains robust, and high-growth regions like Wolverhampton and Walsall provide exciting prospects for those looking to expand or optimise their portfolios.

By focusing on tenant preferences, managing costs effectively, and staying ahead of regulatory changes, landlords can navigate the evolving market and achieve strong returns.

If you need expert advice or support in managing your property investments, I’m here to help. Let’s work together to ensure your portfolio is optimised for success in this dynamic environment.

Concentric Sales and Lettings has proudly served the Wolverhampton community since 1990, offering comprehensive services in property sales, lettings, and management. Whether you’re a landlord, a vendor, or a buy-to-let investor, we’re here to help you achieve your property goals.

Our expertise goes beyond traditional services, with bespoke options for self-managing landlords such as tenancy health checks, portfolio restructuring, and exclusive off-market selling solutions for those exiting the sector.

Ready to take the next step? Click here to explore our consultation options and connect with one of our property experts today.