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Rental costs rocket as demand outstrips supply, finds Zoopla

Annual rental growth reached the highest level for 13 years at 4.6% in the third quarter, according to the latest index from Zoopla.

Across the UK, rents hit an average of £968 in the three months to the end of September as demand from tenants outstripped the supply of available properties.

When London is excluded, average rental growth across the rest of the UK was 6%, with demand doubling in central Leeds, Manchester and Edinburgh and London from Q1 to Q3.

Rental growth at or near a 10-year high across most UK regions – except for in London and Scotland.

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London’s rents have returned to positive territory after falling for 15 consecutive months, with an increase of 4.7% between June and September as offices reopened and workers returned to the city.

However, London rents are still 5% lower than they were at the start of the pandemic.

Zoopla forecasts that the undersupply of rental properties across the country and the strength of the employment market will support rental growth into 2022.

It expects that across the UK, but excluding London, rents will rise by 4.5% by the end of next year.

Meanwhile, London rental growth is expected to pick up to 3.5%, with rents ultimately exceeding pre-pandemic levels.

Zoopla says that the shortage of rental properties has been compounded by both long-term structural issues such as landlords leaving the market following tax changes as well as short-term issues with a surge in demand when lockdown ended.

Rental growth is also explained in part by tenant demand moving up the price bands in the so-called “race for space”, which has not been restricted to the sales market.

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UK monthly rents now account for 37% of an average income for a single tenant occupant.

However, even with strong rental growth, affordability remains in line with the five-year average.

The regions registering the highest levels of rental growth are among those that are the most affordable when compared to the UK average, which has allowed more headroom for increases.

The South West saw the biggest annual increases at 9%, followed by Wales at 7.7% and the East Midlands at 6.9%.

In many of the UK’s largest cities, annual rental growth is running well ahead of the five-year average rate of growth.

Bristol leads with 8.4% growth, followed by Nottingham at 8.3%, and Glasgow at 7.2%.

Zoopla head of research Gráinne Gilmore says: “The swing back of demand into city centres, including London, has underpinned another rise in rents in Q3, especially as the supply of rental property remains tight.

“Households looking for the flexibility of rental accomodation, especially students and city workers, are back in the market after consecutive lockdowns affected demand levels in major cities.

“Meanwhile, just as in the sales market, there is still a cohort of renters looking for properties offering more space, or a more rural or coastal location.”

By Leah Milner

Source: Mortgage Finance Gazette

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Annual rental income growth greater in outer city areas

While an inner city rental property still has a higher monthly rental income, rental homes in outer city areas have seen stronger growth over the past year, according to Sequre Property Investment.

On average across London, Manchester and Birmingham, the monthly cost of renting within an inner city area is £1,152 versus £908 per month in the outer city market, a difference of 27% or £244 per month.

London was home to the biggest difference, with rents across the inner city rental market coming in 37% higher on average, with a 26% difference in Manchester and a 9% difference in Birmingham.

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However, on average across all three cities, annual rental growth across outer city areas has remained largely flat, while across inner city rental areas it has fallen by 4.4% in the last 12 months.

Manchester has seen the strongest performance, with inner city rental values remaining largely unchanged in the last year, while across the city’s outer rental market values have climbed by 3.7%.

In Birmingham, outer city rental values are up 2.2% versus a marginal 0.3% uplift across the inner city.

And in London, there has been a 1.1% increase in rental values across outer city areas and a 7.8% drop across the capital’s inner city areas.

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Daniel Jackson, sales director at Sequre Property Investment, said: “It’s clear inner city rental markets are still struggling due to the decline in demand caused by the pandemic, despite a gradual return to normality from a social standpoint and with regard to the workplace.

“This is particularly evident across the London market, where rental values have plummeted across inner city areas, while they’ve also struggled in outer city areas.

“The good news is that elsewhere, outer city rental values are on the up, with both Manchester and Birmingham seeing very healthy levels of growth.

“This suggests that tenants are now starting to make their return and this is a trend that should soon reach our city centres and help boost values across inner city rental markets.”

By Jake Carter

Source: Mortgage Introducer

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Rental demand in cities up 9.9% in Q3

Rental demand has risen 9.9% in Q3 across the UK’s major cities, according to research estate and lettings agent Barrows and Forrester.

The analysis of 23 major UK cities found that rental demand averaged 42.9% during the third quarter of this year, a 9.9% increase on the previous quarter and 6.8% higher than this time last year.

Cardiff and Glasgow saw the largest quarterly uplift, with rental demand climbing by 22.1% in both cities.

Bristol (21.9%) and Edinburgh (21.5%) also saw tenant demand lift by more than 20% in Q3, with Cambridge completing the top five (19.6%).

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Other cities to make the top 10 included Manchester (14.8%), Newcastle (11.2%), Southampton (10.9%), Plymouth (10.8%) and Birmingham (10.5%).

Newport was the only city to have seen a decline in demand in Q3, down 5.2% on the previous quarter.

Five cities saw demand in Q3 drop below the levels seen this time last year: Belfast (40.9%); Nottingham (3.5%); Portsmouth (3.3%); Liverpool (2.9%); and Plymouth (0.4%).

James Forrester, managing director of Barrows and Forrester, said: “There have been numerous indicators of late that the UK rental market is starting to once again find its feet after one of the most difficult periods in recent times.

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“The demand for city rental homes, in particular, was heavily impacted during the pandemic and as a result, many landlords were forced to stomach a significant decrease in rental income in order to secure a tenant.

“However, this is starting to change and we’re seeing a notable uplift in demand for rental properties across many of the nation’s major cities.

“We expect to see a further boost over the coming months as many tenants look to secure a property ahead of the new year and a fresh start.”

By Jake Carter

Source: Mortgage Introducer

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Goodlord: Average rental cost reaches a year-to-date high

The average cost to a rent a property has reached a year-to-date high of £1,104, according to the latest Rental Index from Goodlord.

Overall, rents in September were found to be 6.94% higher than in September 2020.

The North West has seen a significant increase in the average cost of a rental property, with prices rising by 11% – from £807 to £901.

London also recorded a 2.5% increase, taking the cost of a rental property in London from £1,725 to £1,770. The West Midlands recorded a 1.5% rise.

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However, the East Midlands, North East, South East and South West all recorded decreases in the cost of rent, ranging from 1% to 5%.

After five months of diminishing void averages across England, September saw an end to this trend.

There were increases in void periods in all regions monitored, with the exception of Greater London.

However, the average void period across England is still only 17 days, lower than the averages recorded between January and May of this year.

Overall, void periods remain 10.5% lower year on year.

The biggest jumps were seen in the North East and the North West. The North East recorded a 37.5% increase in the average void period, moving from eight days in August to 11 days in September.

Despite this, the region continues to have the lowest void periods overall, a title it has held for three consecutive months.

The North West saw voids increase by 38%, taking averages from 18 days to 25 days. This makes it the region with the highest overall void periods.

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Greater London saw void periods reduce from 13 days to 12, the only reduction recorded.

The average income of an English renter also rose during September. Salaries jumped up from an average of £25,264 in August to £26,764 last month – an increase of 5.9%.

The average age of an English renter has also increased, rising to 34 years old. This compares to the average renter in August, who was 32.

Tom Mundy, chief operating officer at Goodlord, said: “The year on year trends for the rental market are hugely encouraging.

“The void and rental averages in September 2021 compared to last year show just how strongly the market has rebounded.

“Rents are currently very high, on average, and void statistics continue to be lower than we’d expect, which sets the market in very good stead ahead of the winter months.”

By Jake Carter

Source: Mortgage Introducer

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Renters return: London rental market makes up 4.3 per cent of city GDP

Around £21.4bn is generated in rental income in London alone, which equates to some 4.3 per cent of the city’s GDP according to new research.

The research, from Sequre Property Investment, found that – unsurprisingly – the capital topped the list as the region with the highest rents and the most privately rented homes.

Across the UK, the average tenant pays £12,636 in rent each year, equating to total rental income in excess of £69.4bn across the 2.2m privately rented homes, worth 3.2 per cent of the country’s total GDP.

The figure could have been higher had landlords not dragged rent prices down to entice people back to the capital after pandemic restrictions led to an exodus.

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“Pre-pandemic, at the beginning of 2019, the rental market was in a very strong position. The demand was strong. There was probably a shortage of good stock, so demand was slightly outweighing supply,” Richard Davies told City A.M.

When the pandemic hit, the market was “flooded with properties” as people drifted to grassier pastures.

Which led to more short-let properties going into long-term market, as AirBnB owners turned their holiday properties into homes as tourists and travellers dried up.

Tenants were also found to be agreeing to longer contracts, as to lock in with lower, pandemic-era prices.

Though rents appear to be rebalancing at pre-pandemic levels, Davies explained, rental supply is still reduced.

Since the third quarter of this year, rents have begun to climb again and are back up to 2019 levels and in some areas, maybe slightly higher, he said.

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Davies expects the trend to continue through to end of the year, which he says is ”great news for landlords” after a particularly tough year.

The director of London-based estate agent, Benham and Reeves, Marc von Grundherr agreed, as easing restrictions have given way to an influx of demand for city life once again.

“London remains the beating heart of the private rental sector both in terms of the sheer number of rental properties and the income generated from them,” he said.

“The end of lockdown restrictions and a return to the workplace have already rejuvenated demand and we expect the market to be firing on all cylinders before the year is out.”

By Millie Turner

Source: City AM

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Demand For Rental Property At Five-Year High

Demand for private rented housing in England and Wales has reached a five-year high, a survey of landlords undertaken for the National Residential Landlords Association has found.

Yorkshire and The Humber was the area shown to have the highest rental property demand, followed by the South East and the South West.

Some 65 per cent of private landlords in Yorkshire and The Humber reported demand had increased in the second quarter of 2021: a figure that compared to a national average of 39 per cent.

Even so, the survey, conducted in partnership with BVA/BDRC, concluded that while 13 per cent of landlords in Yorkshire planned to increase the number of properties they rent out over the next year, 20 per cent planned to cut the number of properties they rent.

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In the South East, 63 per cent of private landlords reported demand had increased in the second quarter of 2021. Some 16 per cent of landlords said they planned to increase the number of properties they rent out, while the same proportion intended to reduce the number.

In the South West, 60 per cent of private landlords reported demand for their properties had increased. Some 14 per cent said they planned to increase their letting portfolio, which again was the same proportion that said they intended to cut the number of properties they let.

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The survey confirmed a continued pattern of tenants leaving London in response to the trend towards home working, said NRLA. Just over half of landlords in central London (53 per cent) reported a fall in tenant demand with only 15 per cent of landlords saying it had increased.

But overall, the picture revealed was one of increasing demand with little enthusiasm from landlords for new investment in rental properties.

‘Across Yorkshire and The Humber, the supply of homes is not keeping up with fast rising demand. The only losers will be tenants as they struggle to find urgently needed rental homes. The government needs to change direction and, instead of introducing measures to deter investment in the private rented sector, it must put in place policies which encourage it’, said NRLA Yorkshire and The Humber regional representative Ruth Millington.

Source: Landlord Knowledge

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Rents outside London rising at highest rate for over a decade

Rents outside London are currently rising by 5% year on year, their highest rate for over a decade, the latest Zoopla Rental Market Report has shown.

Zoopla attributed the increases to a widening imbalance between rental demand and supply which pushed rental growth to the highest level seen since 2008.

Meanwhile, in London itself rental declines have bottomed out amid rising demand, reaching -3.8% in July, from -9.8% in February.

The average monthly rent outside London is now at £790, up from £752 in July last year.

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Growth hit 10-year highs in the East Midlands (+6.8%), the North East (+6.5%), the South West (+7.6%), Wales (+6.4%) and Yorkshire & the Humber (+4.9%) in July.

Rental growth in some cities and towns rose even further, with growth in Wigan and Mansfield reaching double figures, at 10.5% and 10% respectively. Hastings, Blackburn, Barnsley and Norwich are registering growth of 9.4% or more.

In London, average rents in the 12 boroughs in inner London rose by 2.3% in the three months to July with the average rent in the capital standing at £1,593pcm.

Nigel Purves said: “This report shines a light on just how deep-rooted the UK’s property affordability crisis actually is. Despite the pandemic-induced exodus, rents in big cities continue to soar, with young professionals and divorcees leading the renewed drive for city-living.

“But demand for gardens and more space doesn’t necessarily align with the reality of properties on offer.

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“Renting can be a good option for some, but it should be just that, an option. Millions of people in the UK are stuck in properties that don’t meet their needs, especially families with young children, and key workers who are wedded to a particular area because of their jobs and support networks.

“These groups are left paying high rents on often unsuitable rental homes. And to add insult to injury, they have no security and very little freedom: they can be kicked out at nearly any time, and their landlords stop them keeping pets or even changing the paint colour on the walls.

“This continued pressure on saving combined with the unfair mortgage lending criteria means that even if they can afford a deposit and mortgage-level monthly rents, these reluctant renters are unable to take their first step onto the property ladder.

“It’s vital the government treats this issue as urgent – if it truly hopes to turn ‘Generation Rent’ into ‘Generation Buy’, it must work together with the property industry to innovate and provide alternative routes to homeownership.”

Source: Mortgage Introducer

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NRLA: Demand for rental properties reaches five year high

The demand for private rented housing has reached a five-year high, according to research released by the National Residential Landlords Association (NRLA).

The survey of private landlords across England and Wales, conducted in partnership with research consultancy BVA/BDRC, found that 39% confirmed demand for homes to rent had increased in the second quarter of 2021 – 8% more than said so in the first quarter of the year.

In Yorkshire and the Humber, Wales, the South West and the South East more than 60% of landlords said that demand for homes to rent had increased.

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In contrast, just 15% of landlords in central London said demand had increased in the second quarter of the year, compared with 53% who said it had fallen.

Despite an overall increase in demand, the proportion of landlords intending to buy property has fallen from the four year high of 19% recorded in the first quarter of the year, to 14%.

In comparison, the proportion looking to divest has returned to 20%, up three percentage points from the first quarter of the year.

As COVID-19 restrictions are lifted, 55% of landlords said that their lettings business will continue to be negatively impacted as a result of the pandemic.

An estimated 81% of those in outer London and 78% of those in central London said they would be negatively impacted.

At the other end of the spectrum, 49% of those in Yorkshire and the Humber said they would be negatively affected.

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Chris Norris, policy director for the NRLA, said: “The evidence is clear that nationally whilst the demand for homes to rent is increasing, landlords are more reluctant to invest in new properties.

“The only losers will be tenants as they struggle to find the homes to rent they need.

“The Chancellor needs to recognise the harm being done by tax hikes imposed on the sector.

“It is clear that there is a significant flight of tenants from the capital in response to the COVID pandemic.

“With lockdown restrictions having ended, and offices beginning to reopen, the jury is out as to whether this trend will continue.”

By Jake Carter

Source: Mortgage Introducer

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Will London Rents Recover After Covid?

Inner London bore the brunt of the pandemic’s impact on the rental market which saw a decade of rental growth wiped out. In previous downturns, Inner London has typically been the region to lead the rest of the country. But this time around it was the only area where rents fell for 13 consecutive months, while rents in other regions reached record highs. However, it appears that late spring marked the bottom of the Inner London market.

For the first time since April 2020, the average rent in Inner London rose on a monthly basis, averaging £2,103 pcm in June 2021 (chart 1). While the average rental home in Inner London costs 16.5 per cent or £415 pcm less than it did this time last year, rents jumped 4.3 per cent month-on-month between May and June, the largest monthly increase on record. June was also the third straight month that the annual decline in rents slowed.

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The reversal in the direction of rental growth has been driven by more tenants returning to the capital. Last month, the number of tenants registering to rent in Inner London was up 16 per cent on June 2020 levels and up 45 per cent on June 2019. Zone 2 recorded the strongest growth in demand, but this has been almost completely driven by domestic, rather than international tenants. Here, the share of tenants coming from outside the capital doubled as more people planned their return to London.

Rising rents have also been supported by lower stock levels, a reversal of the months following the height of the pandemic when landlords struggled to find long-term tenants for their short-term lets. While back in September 2020 there were 14 per cent more homes available to rent in Inner London than in September 2019, by June there were 8 per cent fewer homes to rent than two years ago. Family houses are most scarce, while entry level flats make up most of the homes taking more than a week to let.

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In contrast to Inner London, Outer London rents recorded only six months of falls on an annual basis following the onset of the pandemic. Outer London rents have grown for the last 10 months, with June’s annual rental growth (9.4 per cent) the strongest on record. The average rental home in Outer London now stands at £1,685 pcm,10 per cent more than it did when the pandemic started in March 2020.

Across Great Britain the pace of rental growth continued to climb in June, with rents rising 8.5 per cent year-on-year. In fact, four of the 10 fastest months for rental growth over the last decade have been since the onset of the pandemic. Stock scarcity has become a pressing issue, with 46 per cent fewer homes on the market than at the same time two years ago. In rural and suburban areas, the drop in rental homes on the market has been even greater.

Outside London, rents rose 10.9 per cent annually – the fastest rate of growth recorded during any time since 2014. Six regions saw rental growth hit double digits in June, up from five in May. Last month eight of the 11 GB regions recorded the biggest annual increases since the lettings index began in 2014. Wales, the West Midlands and London were the only regions not to register record rental growth.

Aneisha Beveridge, head of research at Hamptons, said: “Over the course of the pandemic, Inner London landlords have suffered more than investors anywhere else in the country. But in recent months rental growth here has changed course and is now on an upward trajectory. We are forecasting that rents in Inner London will return to pre-pandemic levels within 12 months.

She added: “That said, and despite a recovery, rents in Inner London are likely to remain lower than they would have been had the pandemic not happened. A relatively buoyant recovery has ensued as restrictions have been lifted, but some scarring is likely to remain as tenants become less closely bound to their office desk and international travellers remain in short supply. Nationally, the last 12 months have seen five years of pre-pandemic growth squeezed into a year. Rents are rising at such a pace that monthly rental growth figures could, in more normal times, be mistaken for annual ones. While this growth is underpinned by a lack of stock, it will ultimately be tapered by affordability.”

BY PETE CARVILL

Source: Property Wire

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Average UK rent jumped 4% in the last year – HomeLet

The average UK rent jumped 4 per cent in the last year, according to statistics just released by Homelet, and now stands at £997 per month.

The company also found that every region apart from London saw an increase in recent prices year on year. Within the capital, rents dropped by 0.9 per cent. Meanwhile, the average price across the country is up by 6.4 per cent year on year, now reaching an average of £864 per month.

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Andy Halstead, chief executive officer of HomeLet, said: “We’ve seen from sharp house price spikes across the country that the Coronavirus pandemic changed what Britons are looking for in a property. Many said to be looking for properties offering more living space; for those working from home as an example, that’s also the case in the private rented sector. Rental properties continue to play a crucial role in meeting the demands of people up and down the country, and the flexibility and responsiveness shown by the private rental sector will be vital in the coming months as the country opens up again. As rents increase, we’ve also seen an increase of over 10 per cent in suspicious and fraudulent applications for let property; with backlogs and delays in processing evictions, the demand for high-quality tenant reference and insurances has never been higher.”

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He added: “The overwhelming success of the vaccination drive brings hope that returning to some form of normality could be on the horizon. However, we would still caution that millions could be made unemployed at the end of the furlough scheme – posing considerable problems in tandem with an unbalanced rental market. Whilst the Government looks to stimulate homeownership, the importance of the private rented sector can’t be understated and should not be overlooked.”

BY PETE CARVILL

Source: Property Wire

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