Average rent has risen 11% in the UK over the past year according to the latest Zoopla report market index.
This means the average rent paid by tenants is now £995 per month, up from £897 last year. for sharers.
Figures from Zoopla show that rents have risen fastest in London, with a 15% increase year-on-year. The slowest rate of growth was recorded in Scotland, where rents increased by only 6%.
The rate of rent growth has picked up momentum across most of the UK over the past six months as the economy has emerged from Covid-related lockdowns, creating demand again in city centres.
Zoopla points out that this strong growth comes after a period of moderate rent increases, with growth outside London being between 1% and 4% for much of the last decade. Rental prices have also been hit by the pandemic, with landlords across the UK seeing an average drop of 1% in rents a year ago.
Unsurprisingly, rental demand is particularly strong in city centers, with the return of students, office workers and international demand.
Data from Zoopla showed that the duration of rentals continues to increase, signaling that some tenants may “renew” their tenancy in order to obtain lower rent increases.
The data also shows that it doesn’t take landlords an average of 14 days to rent a property.
Zoopla expects this rental growth to begin to slow in the second half of this year as the “rebound” subsides and tougher economic conditions emerge.
Gráinne Gilmore, Head of Research at Zoopla, says: “High levels of demand amid tight supply continue to put upward pressure on rents, but affordability pressures will mean slower rental price growth through the remainder of 2022.”
Zoopla points out that the rental market is very localized. He points out, for example, that rent accounts for 21% of common income in Manchester, in the local area of Copeland, which includes the towns of Whitehaven and Cleator Moor, where average rent is only 7% of average common income. While some tenants will be concentrated in one location due to family work or school, Zoopla points out that there will be a proportion that may move to other areas to reduce rental expenses. This trend may increase, especially if other household bills and prices continue to rise sharply.
Gilmore adds: “However, the lack of supply is a wider structural problem in the private rental sector, as buy-to-let landlords are not investing at the same rate as before the tax changes introduced since 2016. This will put a floor under rental growth.
“There is a question around rising interest rates and whether renters will feel the impact of rising mortgage rates for homeowners. Most homeowners will have fixed rate mortgages, so this won’t happen. not across the whole market at the same time, but in these market conditions local demand will determine whether owners can pass on this increased cost, especially as the cost of living rises.
“We expect rents to continue to rise this year, albeit at a more modest pace, with UK ex-London rent growth of 4.5% by the end of the year, which is in line independent profit growth forecast for 2022. We expect London rent growth to be around 3.5% by year end.
Chestertons head of lettings Richard Davies says: “Tenants who have secured a property at a reduced rental rate during the pandemic are keen to keep this deal in place for as long as possible, especially in the face of rising cost of living .
“With the return of office workers, international students and corporate tenants, London’s rental market has seen unprecedented demand that exceeds supply. This has created an extremely competitive market for tenants and many have started to offer landlords more rent than they are asking in order to secure a property.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, adds: “The real estate market is not really gravity defying: the 11% rise in rents over the past 12 months has been the hidden chain holding it up.
“Rents have rebounded from the falls during the pandemic. London, which suffered particularly during the space race, rebounded even harder.
“Enormous pressure from spiraling bills, rising mortgage costs and sharp declines in consumer confidence have historically meant that house prices have started to weaken. And while no one is ruling it out eventually Rising rents are the missing piece of the puzzle for those trying to figure out how housing prices continue to rise so rapidly.
She adds: “While house prices may rise more slowly in the coming months, we are not seeing any widespread belief that house prices will actually come down – so you may still see property getting more expensive. while you wait.
“Inflation also has a hidden benefit for mortgage holders, as it erodes the value of your debt. Anyone borrowing at this time last year will have seen inflation devour 7% of the real value of their debts – before you even factor in repayments.