UK Rental Market Update: Insights and Predictions for Renters in 2023

The cost of living squeeze is expected to put energy efficiency and value for money high up the agenda for many renters in 2023. 

With climbing energy costs, 85% of renters in our Tenant Survey Report say the environmental efficiency of their home is important to them. 

The legacy of the pandemic is also likely to influence renters in the months ahead when it comes to their homes and lifestyles.

Curious to know more? We take a closer look at what could be in store for the UK rental market this year.

Rents

UK-wide rents are set to climb 4% in 2023, putting further pressure on household finances. But there are regional variations.

At a city centre level, rents could increase by just 1% in both Edinburgh and Glasgow. Elsewhere, rental growth is predicted to reach 3.5% in both Leeds and Liverpool, 4% in Bristol, and 5% in Birmingham.

Rents are expected to increase the most in Manchester as more young people move to the area to live and work. Renters in the city centre could see their rental bills jump by 6%. 

And London rental growth is expected to stand at 6% and 4.5% in the central and outer areas of the city respectively.

Rising rents in the major city centres are being fuelled by the return of students and young professionals after the pandemic. 

Rental demand and supply

There’s currently a mismatch between demand for rental properties - in other words, rental enquiries - and the supply of homes for rent in the UK. 

To put this into context, rental demand is 46% above the five-year average. Meanwhile, the level of homes for rent is 38% below the five-year average, according to Zoopla’s Rental Market Report (December 2022).

Rental demand is expected to continue in 2023. The rising cost of living and higher mortgage rates as well as the end of Help to Buy in March are all predicted to delay some renters from getting onto the housing ladder. More than 60% of renters in our Tenant Survey Report expect their next move to be to another rental property.

But there’s not predicted to be any significant increase in the supply of rental properties to soak up demand.

The good news is there are a number of ways for renters to get ahead of the competition for rental properties this year. This includes registering for exciting new rental homes before they’ve even hit the market.

“As the cost of living crisis starts to affect everyone in the UK, the lack of rental properties available is increasing the rents even further – and this is not set to stop in 2023,” explains Charlotte Russell, area director for core lettings. 

“However, there is still opportunity across London, with larger developments being released to let. This will give more choice of rental homes and also high quality facilities, such as swimming pools, steam rooms, fully-equipped gyms, dining areas, communal work space and more. There is definitely additional value in the rent, including extras that tenants may pay for on an annual or monthly basis.” 

Rental priorities

With the cost of living squeeze, renters are likely to be drawn to rental homes that offer the most value for money in 2023. 

‘Green’ rental homes with lower energy bills are expected to be in high demand. In fact, 83% of renters say the energy efficiency of their next home will be either crucial or important to them, according to our Tenant Survey Report. And more than 40% of renters are prepared to pay a premium for a more environmentally-efficient home.

The experience of lockdown has meant that outside space is a key priority too. More than half of the survey’s respondents say that their own outside space is more important to them now. A similar proportion place higher importance on renting a home close to parks and other green space.

Proximity to leisure facilities, transport connections and local amenities are also all set to rank highly this year. Some 51% of those surveyed still consider renting a home close to public transport as more important now than before the pandemic.

JLL sources:
UK Residential Forecasts (Q4 2022)
Tenant Survey Report (2022)