UK rents continue to climb and city centres are currently seeing huge levels of rental demand from students, office workers and international tenants.
The latest Zoopla UK Rental Market report has revealed how the rental market is currently performing, noting an 11% annual rent rise since Q1 2021. The average household now pays £995 per month on rent in the UK.
One year ago, the portal’s same report actually recorded a -1% fall in rental prices. The current figures show the impact of strong demand from tenants combined with a lack of supply, particularly in some parts of the country.
From an affordability perspective, Zoopla found that the average single earner pays around 37% of their salary on rent. This drops to 18.5% each for sharers. While wage growth only climbed by 8.8% last year, UK rents have risen at a slower pace than earnings or inflation since 2016.
London rental market bounce
There has been a particularly acute increase in rental prices in London, compared to average UK rents. The capital’s rental growth fluctuates much more than across the rest of the country, but Zoopla’s report shows a 15.7% rise over the past year.
The average renting household in London now pays £1,698 per month. This is significantly higher than the UK average of £995 per month, or £830 excluding London.
Zoopla notes that the supply/demand imbalance is much more significant in the capital than in other top growth areas. In London, the dynamics show demand sits at 68% compared with -47% in supply of rental properties.
The asking price increase is also being led by the city’s flats, says the report, indicating a bounce-back and behavioural change since the pandemic began to push people away from cities in the ‘race for space’.
Affordability of UK rents
According to the English Housing Survey, around a third of renters are single occupants, so affordability has become more stretched for the average tenant paying out 37% of their gross earnings on rent.
However, for the other two thirds of renters who live with friends or family – or in house shares – the average being forked out is less than a fifth (18.5%).
Zoopla notes that there are major regional and local variations. The north west and London, for example, both have a very wide range of affordability depending on the specific area.
The report states: “While rent accounts for 21% of joint income in Manchester, in the local authority of Copeland, which includes the towns of Whitehaven and Cleator Moor, average rent accounts for just 7% of average joint income.”
So what can tenants do if things are too tight in their current property? “As in the sales market, many renters will be centred in a location due to family, work or school. However, there will be a proportion of renters who are able to move to other markets in order to cut their rental outgoings.
“Another way to do this is to stay put in their current rental property, as often tenants in situ can strike alternative rental deals with their landlord, especially landlords keen to avoid a void period on their property.”
Average tenancy lengths have been creeping up since 2017, according to Zoopla. Tenants are now staying by an additional five months in their rental properties, up to 75 weeks compared to 12 months five years ago.
What the future holds
Will UK rents continue to rise at this pace going forwards? Zoopla believes rental growth in some areas could become more subdued as people struggle with the rising cost of living. Renters with more disposable income will of course have the pick of the market and more flexibility.
The report adds: “The lack of supply is a wider structural issue in the Private Rented Sector (PRS) as buy-to-let landlords are not investing at the same pace as they were before tax changes which have been introduced since 2016. This will put a floor under rental growth.
“Even so, in a market which has registered double-digit annual rental growth, landlords in local markets will find increased sensitivity to pricing among renters.”
Overall, though, the property portal predicts that UK rents will continue to grow over the course of the year, just at a potentially slower pace. It sets UK rental growth excluding London at 4.5% for the year, while it believes London rents will climb by 3.5% by the end of 2022.