Rental Prices Continue to Rise in the Busier Season
Posted on Wednesday, 12 July, 2023
During the traditionally busy summer months, rental values continue to experience annual growth, indicating a sustained upward trend without any immediate signs of slowing down.
In recent years, there has been a consistent departure of landlords from the sector, as noted by Zoopla. However, this trend has been ongoing since 2018 and is not currently gaining momentum.
Nicky Stevenson, Managing Director of Fine & Country, highlights the issue of affordability as renters are forced to widen their search areas. In the prime market, average rents have risen by 11% compared to the previous year. The North East and South East are the only regions where the average price of a prime monthly rental has decreased year-on-year. Fierce competition is driving demand per rental property to exceed May 2019 levels by 162%, resulting in more than a quarter of properties being let above the listed price, according to Rightmove.
Zoopla’s report indicates that rents have been outpacing average earnings for the past 21 months, leading to a tight affordability situation. The ONS Opinions and Lifestyle Survey reveals that 15% of renters find it very challenging to pay their rent, which is an increase from 10% in November of the previous year. Consequently, renters are compelled to modify their search behavior, resulting in a 50 km2 expansion of rental search areas, as reported by Rightmove.
Stevenson notes that the supply-demand imbalance persists. Although there is little expectation of a significant improvement in the availability of rental homes in the near future, a slowdown in the sales market could have a marginal positive impact. Fewer landlords are selling their properties, opting instead to rent them out while waiting for potential price drops, which could slightly increase the rental stock.
The rental sector continues to be viewed as a strong medium-to-long-term investment, with more than one in four landlords owning over five properties planning to expand their portfolios in the next year. The Royal Institution of Chartered Surveyors predicts a rental growth rate of 6% per annum over the next five years.
