Rents hit new high – but record growth is slowing down

Rents hit new high – but record growth is slowing down

0:02 AM, 28th April 2023, About A year ago

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Tenants are faced with rents hitting a new record high with renters outside of London now spending an average of £1,190, Rightmove reveals.

The platform says that rents have risen for 13 consecutive months, but the pace of growth is now slowing down.

However, average rents in London have hit a new record by soaring past £2,500 for the first time.

Also, strong demand means that rental properties are being let quickly.

‘Early signs of improvement on squeezed supply levels’

Tim Bannister, Rightmove’s director of property science, said: “We have seen some early signs of improvement on squeezed supply levels this year.

“Though with no significant influx of new properties becoming available to rent currently on the horizon, the mismatch is set to continue for some time.

“Many agents are having to manage a very high volume of tenant enquiries for every property that they let in the current market.”

He added: “Properties in popular areas within an affordable asking rent range of that local area are likely to be snapped up almost immediately, and on average homes are finding a tenant much more quickly than this time in 2019.”

Supply of rental homes is ‘very constrained

One reason for the record high rents is that the supply of rental homes is ‘very constrained’ – but it is improving.

Rightmove says that the number of available rental homes is 6% higher than it was last year.

And, in the first three months of 2023, that supply improved by 8% compared with the same period in 2022.

Despite that rise, rental home supply is still 46% below 2019’s level.

Gap between supply and demand has narrowed

Rightmove also highlights that the gap between supply and demand has narrowed compared to last year – but it is still at ‘near record levels’.

The firm says that the number of tenants enquiring is ‘greatly outweighing’ the number of rental homes that are available.

Competition between tenants has eased by 2% over the same period – but it is more than double (+173%) the level it was back in 2019.

Also, demand from tenants is 4% higher than this time last year and still 48% higher than 2019.

‘Rental supply-demand imbalance is only likely to worsen’

Iwona Hovenko, a real estate analyst at Bloomberg Intelligence, said: “Unfortunately for tenants, the rental supply-demand imbalance is only likely to worsen in the near-term future, as smaller private landlords exit the sector due to high taxation, interest rates and the steep costs to bring their properties to at least EPC band C in the next few years.

“Shortage of qualified labour and the still-high prices of materials may make that job even tougher.”

She added: “Meanwhile, although housing market remains relatively resilient – the ranks of renters may continue expanding due to potential buyers being priced out by the high interest rates, lower mortgage affordability, as well as squeezed disposable incomes.”

‘Applicants competing over a shortage of property’

Craig Webster, the managing director of Tiger Sales and Lettings in Blackpool, said: “The rental market remains very busy, with multiple applicants competing over a shortage of property to rent.

“We’re seeing more tenants staying put in their current home, which is having a knock-on effect for the rest of the market and contributing to the shortage.

“We are also seeing some of our landlords decide to sell up for a variety of reasons – more legislation to navigate, higher mortgage costs or because they can now get a good price for their home.”

He added: “However, for new or existing landlords looking to grow their portfolio, yields remain very strong, with a mix of property types, both houses and flats, proving popular.”

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