Average Cost of Rent Increases 10.4% Year on Year as Demand Continues to Outstrip Supply

Recent data from Zoopla reveals that over the past 21-months, rents have grown faster than average earnings with rental inflation running in double digits for fifteenth consecutive month.

Over the past year, the rental expenses in Britain have surged by 10.4%, placing a significant burden on individuals' finances. In certain regions, the monthly rental payments now consume a substantial 40% of an average income.

Among all cities, Edinburgh has experienced the most rapid escalation in rental prices over the course of the past year. With costs surging by 13.7%, the average monthly rental now stands at £1,130. Seven cities have experienced double-digit rental inflation in the past year: London, Manchester, Glasgow, Southampton, Aberdeen and Cardiff. Across the UK, the typical rent has increased by £106 per month to £1,126.

‍

Cost of Rent Now 28% of Pre-Tax Earnings

Rent now accounts for 28% of a tenant's pre-tax earnings, slightly higher than the ten-year average of 27%.

In London, rents account for 40% of tenants' gross earnings, but this is below the 2015 peak of 43%.

‍

Rental Demand Outstrips Supply as Properties to Rent Down by a Third

Despite the high cost of renting, demand continues to outstrip supply and is expected to continue to outpace wage growth as the number of available homes to rent is down by a third compared to the five-year average.

Richard Donnell, executive director of Zoopla, said, "The cost of renting is at its highest for a decade with emerging signs of stress for some renters, especially those on lower incomes. Boosting rental supply is the key policy lever to support a healthier and more sustainable rented sector."

‍

Mortgage Rate Increases Increase Demand for Private Rental Sector Properties

The undersupply is a major factor pushing up prices. Demand is only expected to increase as increases in mortgage rates impact first-time buyers ability to buy their own home, the strength of the labour market, high immigration and the busiest period for rental demand being between July and September.

This results in more renters having fewer homes to choose from, adding additional pressure to rental inflation.

‍

No Change to the Number of Private Rented Homes Since 2018

Increasing the supply of private rental property would have some impact on rental inflation, but since 2016, there has been no change in the number of private rented homes, with the pace of landlord sales remaining the same since 2018. Currently, one in ten homes for sale on Zoopla are former lettings, a figure that has remained broadly flat for the past three years.

‍

Interested in finding out where to buy an investment property for the best price and rental growth? Click here.

‍

‍

‍