A recent study has shown that the cost of renting a home in the UK is soaring, with more than half of all rental homes now commanding prices above the £1,000 per month mark. This situation underscores a growing problem in the housing market, where the demand from tenants far outstrips the supply of affordable rental properties.
According to the latest data from Zoopla, a leading property website, the number of rental homes classified under the higher-rent bracket has nearly doubled in the last five years. This sharp increase has pushed the average rent in the UK to a record £1,223, marking a 29 per cent hike since January 2020. Richard Donnell, Zoopla’s executive director, highlighted the chronic imbalance plaguing the rental market. “The last two years have seen a continuous mismatch between the supply of rental properties and the demand from tenants… Only a significant and sustained increase in the number of rental homes can begin to make housing more affordable for UK renters,” he noted.
Regional Rent Rockets
The east of England has witnessed the most pronounced shifts, where 70% of rental homes now fall into markets with average rents of £1,000, a stark increase from 24% in 2020. The south-east shows a similar trend, with nearly all rental homes exceeding the £1,000 threshold, up from just under half four years prior. This trend of escalating rents is spreading beyond the southern regions, affecting areas such as Scotland, the north-west, East Midlands, and West Midlands, where a fifth of rental homes are now in the £1,000 a month rent bracket. Yorkshire and the Humber, and the north-east are less affected, showcasing the regional disparities within the UK rental market.
The Impact of Pandemic and Wage Changes
Neal Hudson, a housing market analyst at Residential Analysts, points out that rents were stretching affordability even before this surge, driven by rising wages and a rebound in urban living post-pandemic. However, there’s a glimmer of hope as the rental inflation rate has decelerated to 7.8% annually, the lowest in two years. This slowdown is attributed to a combination of weakening demand and increased affordability pressures rather than a significant rise in the supply of rental properties.
London’s Cooling and the Nationwide Scenario
London has seen a notable drop in rental growth, down to 5.1% from a staggering 15.3% a year ago, with demand dropping by 30% as supply increases by the same margin. Other cities like Manchester and Birmingham are also experiencing heightened rental costs, with increases of 9.6% and 8.6% respectively. Scotland stands out with a double-digit rental inflation rate of 11.6%. The cooling off in some regions could be due to eased mortgage rates and landlords adjusting their rent expectations in response to the cost of living crisis and higher borrowing costs.
Looking Ahead
With rental inflation expected to slow to 5% over the next year, the insights from Zoopla suggest that the rental market may be approaching a ceiling in terms of what tenants can afford. This shift could herald a period of more moderate rent increases, but it also emphasises the need for a significant boost in the supply of rental properties to truly tackle the affordability issue head-on.