In recent years, a significant shift has reshaped the private rental market: the long-standing North-South rental divide has narrowed to its closest point in over a decade. This trend is having far-reaching implications for buy to let landlords and tenants. Once defined by vast disparities in rental prices, the North and South are now showing signs of convergence, challenging traditional assumptions about affordability and investment potential across the country.

The narrowing gap reflects broader economic and societal changes, including the rise of regional economic hubs, improved infrastructure in the North and shifting tenant preferences in the aftermath of the COVID-19 pandemic. While the South remains more expensive overall, the North’s surging rental growth has led to a rebalancing of the market that was almost unimaginable a decade ago. This transformation is redefining how renters and investors approach the housing market, creating both opportunities and challenges.  

Understanding the North-South Rental Divide

Historically, UK rental prices in the South of England - dominated by London and the South East - were significantly higher than those in the North. These differences were driven by economic disparities, job opportunities and higher population densities in southern regions, which created a sustained demand for housing. The South’s reputation as the UK’s economic powerhouse meant tenants often paid a premium for access to lucrative job markets and cultural hubs.

However, as of August 2024, this gap had narrowed to just 37%, compared to a peak of 55% in November 2021. According to recent data, the average monthly rent in the South is £357 higher than in the North, marking the closest the two regions have come in over a decade. This convergence has been driven by a combination of rising demand and rental growth in northern cities, alongside a slowdown in southern markets such as London. As the housing market evolves, this narrowing divide is challenging longstanding assumptions about where tenants and landlords can find the best value in the rental market. ‍

What Is Driving This Convergence?

Several factors have contributed to the narrowing North-South rental divide:

1. Accelerated Rental Growth in the North

Over the past five years, rents in the North of England have increased by 48%, outpacing the 34% growth seen in the South. Cities like Manchester, Leeds and Newcastle have experienced rising demand as their economies expand and infrastructure improves. As a result, investors in buy to let property in the North are seeing significantly higher rental yields than in the South, making the North increasingly attractive to landlords.

2. Slower Rental Growth in the South

By contrast, the South, particularly Greater London, has seen relatively modest rental growth. Real rental growth in London since 2019 stands at just 3%, with an annual increase of only 0.2%. This stagnation has kept UK rental prices in the South relatively stable while the North continues to rise, reducing the overall gap.

3. Changing Tenant Preferences

Post-pandemic lifestyle shifts, including the rise of remote working, have encouraged many tenants to move out of the South in search of more affordable and spacious housing. Northern cities, offering lower living costs and improving amenities, have become a popular choice, pushing up demand and, consequently, rents.

4. Economic Development and Investment in the North

Government-led initiatives such as the Northern Powerhouse have revitalised northern economies, attracting businesses and creating job opportunities. Cities like Manchester, Liverpool and Sheffield are benefitting from new infrastructure projects, making them more appealing to both tenants and investors.  

The Implications for Tenants

The narrowing rental divide has both positive and negative consequences for tenants:

• Affordability Shifts: While the North remains more affordable overall, the rapid increase in rental prices in the region is closing the gap. Tenants in cities such as Manchester and Leeds now face higher rents compared to just a few years ago.

• Improved Living Standards: The growing demand in the North has spurred improvements in housing quality and local amenities, benefitting tenants. However, this also means increased competition for properties in popular areas.

• Opportunities in the South: Slower rent growth in the South may offer more stability for long-term tenants. For those who can afford it, London and other southern cities still offer opportunities in high-demand sectors, such as finance and technology.

Implications for Investors in Buy to Let Property

For landlords and property investors, the narrowing North-South rental divide presents opportunities and challenges:

• Increased Demand for Northern Properties: With higher rental yields and lower property prices, the North has become a hotspot for buy to let property investment. Investors can achieve yields of 8% to 9% in some areas, particularly in cities such as Liverpool and Manchester.

• Shifting Investment Strategies in the South: In the South, investors may need to focus on property improvements or target niche markets, such as luxury rentals and purpose built student accommodation, to maintain profitability. Slower growth in rental prices means landlords must find new ways to remain competitive.

• Diversification Across Regions: With the gap narrowing, investors are increasingly diversifying their portfolios across the UK. A combination of northern and southern properties can balance risk and reward, as each region presents unique opportunities.  

Looking Ahead

The narrowing North-South rental divide is reshaping the UK rental market, but whether this trend will continue remains uncertain. Future developments will depend heavily on factors such as housing supply, government policies aimed at regional economic balance and broader economic conditions, including inflation and wage growth. The role of infrastructure projects, such as improved transport links and urban regeneration in northern cities, will also influence how the market evolves.

For tenants, this shifting landscape may bring opportunities to reconsider where they live and work, and eventually invest in long-term housing. Meanwhile, property investors must carefully evaluate emerging trends to ensure their strategies remain aligned with market realities. As regional disparities become less pronounced, adaptability and awareness of market dynamics will be key for all stakeholders navigating this evolving rental market.  

FAQs

Q: Why has the North-South rental divide narrowed?

A: The divide has narrowed due to faster rental growth in the North and slower growth in the South. Factors include economic development in northern cities, changing tenant preferences and government investment in infrastructure projects.

Q: Are UK rental prices still higher in the South?

A: Yes, rents in the South are still higher, but the gap has reduced significantly. As of August 2024, the average rent in the South was £357 higher than in the North.

Q: Is it a good time to invest in buy to let property in the North?

A: Yes, the North offers strong potential for high rental yields, driven by rising demand and relatively affordable property prices. Cities such as Manchester and Liverpool are particularly attractive to investors.

Q: How does the narrowing divide impact tenants in the North?

A: Tenants in the North are facing rising rents, which may affect affordability. However, improved amenities and economic opportunities in the region are also creating a better quality of life for many renters.

Q: What does this mean for the future of the UK rental market?

A: The convergence of rental prices suggests a more balanced rental market across the country. However, regional dynamics will continue to evolve, and both tenants and investors should stay informed about trends and opportunities.