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More than half of the UK's rented homes are in markets where average rents are more than £1,000 a month, underscoring how high demand among renters is impacting affordability.
The number of rental homes falling into the top rent bracket has nearly doubled over the past five years, according to data from Zoopla. Rents have risen by 29 per cent since January 2020, with the average UK rent reaching £1,223.
“The last two years have been characterized by a persistent imbalance between supply and demand for rentals… Only rapid and sustained expansion of rental housing will begin to improve affordability for UK renters,” said Richard Donnell, CEO at Zoopla.
The changes are most striking in the east of England, where 70 per cent of rented homes are on the market at average rents of £1,000, compared to 24 per cent in 2020.
Nearly all homes in the Southeast fall into this category, compared to just under half four years ago.
This trend is also spreading outside southern England. A fifth of rented homes in Scotland, the North West, East Midlands and West Midlands are in markets where the average rent is £1,000 per month.
In Yorkshire and the Humber, only 4 per cent of homes fall into this category, while no markets in the North East are above this level.
“Rents were already incredibly unaffordable even before the recent wave of high rents,” said Neil Hudson, housing market analyst at Residential Analysts, adding that this was driven by “rising wages and the post-pandemic recovery element in urban living.” “
Despite this, rent inflation also slowed to 7.8 per cent annually, its lowest level in two years.
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The average letting agent currently has 12 homes available to rent, which is a fifth higher than last year, but 28 per cent lower than the pre-pandemic average. The average rental home 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 weak demand and rising affordability pressures rather than any significant expansion in available supply.”
In London, rent growth fell to 5.1 per cent from 15.3 per cent a year ago. Demand is 30 percent lower than it was a year ago, while supply is higher by the same amount.
Average rents in Manchester were up 9.6 per cent on a year ago, and by 8.6 per cent in Birmingham. Scotland is the only region where rent 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 rental expectations. Rising borrowing costs on mortgages have prompted some landlords to pass on the increases to their tenants or sell their properties. They may then have been sold to owner-buyers or converted into Airbnbs, removing them from the long-term rental market.
“Landlords may realize that there is an upper limit to rent affordability because of the high cost of living,” Hudson said. “Some of them became too greedy for the market and reshaped expectations.”
Rental inflation is expected to slow to 5 per cent during 2024, with Zopla saying low levels of net new investment mean below-average levels of rental supply will persist.
