More than 20 prospective tenants compete for each available property
Imbalance between rental supply and demand persists across the UK, with rental growth for new lets now at 5.4%, Zoopla’s latest Rental Market Report has revealed.
While the current rental growth is half the rate seen a year ago, it still exceeds the growth in average earnings, which is currently 5.1%. As of July 2024, the average rent stands at £1,245 per month, up £63 compared to the previous year.
Zoopla noted that a shortage of supply remains a key issue for renters, driven by low levels of new investment from private landlords. Although the number of homes for rent has risen by nearly 20% year-on-year, it remains 24% below pre-pandemic levels.
Despite easing demand due to falling mortgage rates, stricter visa rules, and fading pandemic-related factors, competition remains fierce, with 21 prospective tenants vying for each available property – more than double the pre-pandemic average.
The report highlights that a lack of new investment in the private rental sector has contributed to a 30% rise in rents over the past three years. Increasing the supply of rental properties is crucial to tempering future rent increases amid sustained demand.
Zoopla data also shows a steady trend of landlords selling properties, a shift that began in 2016. In July 2024, 12.5% of homes listed for sale on Zoopla were previously rental properties. Higher mortgage rates have accelerated this trend in recent years, in addition to tax and regulatory changes introduced since 2016.
Upcoming rental reforms in the government’s Renters Rights Bill have already influenced many landlords’ decisions to exit the market. Speculation around potential tax changes in the autumn budget may further spur property sales, potentially exacerbating the supply shortage and pushing rents even higher.
With property sales taking over 20 weeks to complete, any immediate tax changes would not be reflected until after the budget. However, a delay could lead to a further increase in landlord sales.
The slowdown in rental growth is particularly pronounced in London, where rents have risen just 2.5%, and in other major UK cities, which have seen growth of 5.8%. In contrast, rents are rising more sharply in smaller cities and towns, where housing is more affordable. Six postal areas have reported annual rent increases of 10% or more.
Scotland has seen significant rent hikes in Kilmarnock (13%) and Kirkcaldy (12%), both of which remain 25-35% below average Glasgow rents. Rent controls in Scotland have been cited as contributing to the rise in rental prices.
In England, rental growth has surged in areas such as Wolverhampton (12%), Oldham (11%), Darlington (10%), and Walsall (10%), all of which are near major cities or well-connected to transport hubs.
While demand for rental housing has eased slightly due to lower mortgage rates and reduced migration, it is expected to remain above average for the rest of 2024. Rents are forecasted to increase by 3-4% by year-end. The ongoing affordability issues in the housing market, particularly in southern England, will continue to drive demand for rental properties.
“The slowdown in rental inflation is being drawn out by a lack of homes for rent and continued strong demand, driven by the unaffordability of home ownership,” said Richard Donnell (pictured), executive director at Zoopla. “Rental inflation is slowing in some major cities where rents are high, but they are still increasing quickly in more affordable areas.
“Any new policy or tax changes that result in a reduction in supply will simply push rents higher hitting low-income renters hardest. It is essential policymakers focus on growing the stock of homes for rent as the primary route to slowing rental inflation and improving choice for renters. As things stand, the growing unaffordability of renting is the only route to slower increases in rents.”
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