The UK’s economy is growing more strongly than expected according to the Organisation for Economic Co-operation and Development (OECD). The agency previously predicted 0.4% growth this year but has now revised that figure upwards to 1.1% at the end of September 2024.
That’s the same rate as Canada and France, and comes at the same time as the Bank of England governor, Andrew Bailey, confirmed that lower borrowing costs are here to stay.
He said: “I do think the path for interest rates will be downwards,” following the Bank’s rate reduction in August. The new 5% rate was then retained in September and the City is betting on further reductions in both November and December.
Altogether, the economic picture in the UK is good, with the exception of wages. The Financial Times reports that national wage growth has slowed to 4% over the last three months due to a range of factors.
Despite this, the health of the overall economy and the huge number of renters looking for homes means that the average rent is still going up – which is great news for anyone investing in UK property.
Overwhelming demand for rental property pushing rents up
The Office for National Statistics (ONS) has confirmed that there are at least 5.4 million households in the private rental sector now. That is more than 19% of all households in the UK, and the number of renters keeps rising each year.
Due to this overwhelming demand, ONS data shows that the average private rent is rising by 8.4% year-on-year as of September 2024. In other words, more than twice as fast as wage growth.
Richard Donnell, Executive Director of Research at Zoopla, says: “The unaffordability of homeownership will continue to support demand for renting, especially across southern England, where a sizeable proportion of workers are unable to buy.
“A lack of meaningful growth in the supply of affordable housing means the private rented sector will continue to see demand from those on lower incomes, adding to demand further.”
Future rental growth in the UK
The unaffordability of homeownership will also keep an increasing number of people in the Private Rented Sector (PRS) for the foreseeable future.
An updated rental forecast from JLL shows just how high rents could go in the next five-year period, starting with 2024.
Cumulative growth of 18.8% by the end of 2028 means that investors’ monthly rental income is set to grow very fast in the coming years – making this an ideal time to invest in UK buy-to-let property.
It is even possible to find rental growth that is significantly more than the national average if you search in the UK’s best buy-to-let markets. For example, Manchester (12.5%) and Liverpool (up to 12%) have both seen rental growth that is approximately 50% higher than the national average over the course of 2024 so far.
When compared to wages, rental growth in these cities is up to three times higher – making this a great time to buy investment property in Manchester and Liverpool.
A resilient market offers perfect conditions for investors
The housing market itself is incredibly resilient, and the Bank’s August rate cut provided an instant boost for homeowners, homebuyers and property investors. House prices in the UK have hit a two-year high as a result, and property has established itself as a superior investment to stocks and shares.
However, it is the ever-increasing rental figures which should stand out to investors. There is money to be made on capital appreciation throughout the new property cycle, but monthly rental income is the bread and butter which sets the UK property market apart from other types of investment.
Want to buy UK property in the best buy-to-let hotspots? See our available high yield property opportunities today and get in touch with the team.
