New data shows that the proportion of the private rented sector (PRS) that lives in urban areas has risen from 80% to 86% over the last decade, mostly accounted for by regional cities outside London.

The growth of the private rented sector in the UK has been well documented, and there is evidence from the most recent English Housing Survey that activity in this market is increasingly clustering in cities around the country.

Knight Frank has monitored a range of data and combined it with its Tenant Survey to develop a PRS index, which reflects average yields achieved in key UK cities. The 'Yield Guide' shows a slight tightening in yields for prime PRS deals in Q2 across the Greater London market, as well as in many of the other key cities except Bristol and Glasgow.

Meanwhile, the growth in the size of the UK rental sector looks likely to continue. Demand for rental property is being underpinned by affordability constraints in many parts of the sales market as well as increased hurdles in the mortgage market. There is also an increasing desire to own property with flexible tenure, especially among young professionals, who want to live close to where they work.