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Over half of rented homes in the UK are in markets with average rents of over £1,000 per month, underlining how high demand among tenants is straining affordability.
The number of rental homes falling into the higher-rent bracket has nearly doubled over the past five years, according to data from Zoopla. Rents have increased by 29 per cent since January 2020, with the average UK rent hitting £1,223.
“The last two years have been characterised by an ongoing imbalance between rental supply and demand . . . Only a rapid and sustained expansion in rented housing will start to improve affordability for UK renters,” said Richard Donnell, executive director at Zoopla.
The changes are most striking in the east of England, where 70 per cent of rental homes are in markets with average rents of £1,000, compared with 24 per cent in 2020.
Nearly all homes in the south-east fall into the bracket, up from just under half four years ago.
The trend is also spreading outside the south of England. A fifth of rented homes in Scotland, the north-west, East Midlands and West Midlands are located in markets where the average rent is £1,000 a month.
In Yorkshire and the Humber, just 4 per cent of homes fall into the bracket, while the north-east has no markets over the level.
“Rents were already incredibly unaffordable even before the recent bout of high rents,” said Neal Hudson, a housing market analyst at Residential Analysts, adding that this has been driven by “rising wages and an element of post-pandemic rebound in urban living.”
Despite this, rental inflation has also slowed to 7.8 per cent a year, its lowest level in two years.
The average letting agent currently has 12 homes available for rent, a fifth higher than last year, but 28 per cent lower than the pre-pandemic average. The average home for rent attracts 15 inquiries, down from 20 in 2021 but double pre-pandemic levels.
According to Zoopla, the moderation in rental growth is “primarily due to weakening demand and growing affordability pressures rather than any major expansion in available supply.”
In London, rental growth has dropped to 5.1 per cent from 15.3 per cent a year ago. Demand is 30 per cent lower than a year ago, while supply is higher by the same amount.
Average rents in Manchester are 9.6 per cent higher than a year ago, and up 8.6 per cent in Birmingham. Scotland is the only region where rental inflation is in double digits, at 11.6 per cent.
The cooling may also be a result of mortgage rates easing and landlords lowering their expectations on rents. Higher borrowing costs on mortgages prompted some landlords to pass on increases to tenants or sell their properties. These may have then been sold to owner occupier purchasers or converted into Airbnbs, removing them from the long-term rental market.
“Landlords may be realising there’s an upper limit on rental affordability due to the rising cost of living,” said Hudson. “Some of them got too greedy for the market and are rebasing expectations.”
Rental inflation is expected to slow to 5 per cent over 2024, with Zoopla saying that low levels of net new investment mean below average levels of rental supply are set to persist.
