Data from Rightmove, the leading property website, shows that average advertised rents outside of London hit a record high of £1,316 per month in May. That’s a 7% increase compared to last year, easily outpacing inflation.

In London, things are slightly different. While rents are still climbing (up 4% from last year), the rate of increase has slowed down from its peak of 18% in 2022. This is partly due to a slight improvement in the balance between supply and demand.

Why are rents going up?

The main driver behind this rental rise is a simple issue: demand is outstripping supply. There are simply not enough properties available to meet the needs of renters.

Several factors contribute to this shortage:

• Higher interest rates: Many landlords with buy-to-let mortgages are facing increased costs and are passing those costs onto tenants through higher rents.
• Lack of new housing: The UK has a long-standing shortage of new homes, which is putting further pressure on the rental market.

The North-South Divide

The rental market shows a stark contrast between the capital and the rest of the UK. While Londoners are seeing a slight slowdown in rent growth, those living outside the city are facing the full brunt of the rental boom.

The average rent in London is currently £2,652 per month, almost three times higher than the £894 being asked in the North East.

Scotland – The Hardest Hit

Scotland is experiencing the most severe imbalance between supply and demand, leading to the sharpest rent increases. Meanwhile, the situation in London has actually improved somewhat due to fewer tenants looking to move and an increase in available rental properties.

What does this mean for landlords?

These high rents are great news for landlords! The current market is highly favourable for those with rental properties, providing a strong potential for income growth.

However, it’s important to remember that the current situation is unsustainable in the long term.

A Call for Action

Rightmove is calling on the next government to take action and address the imbalance in the rental market. They are calling for:

• Accelerated housebuilding: This will help increase the overall supply of housing and ease pressure on the rental market.
• Incentives for landlords: Encouraging landlords to invest in more rental properties will also help to increase supply.

Rightmove estimates that an additional 120,000 rental properties are needed to bring rent growth down to a more sustainable level of around 2% per year.