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Rental growth is the highest it’s been in three years reveals Zoopla’s Rental Market Report. But while rents are rapidly on the rise it’s not all bad news.
Zoopla’s latest rental market report showed that rents have increased by 2.6 per cent over 2019 to an average of £886 pcm. This is a dramatic increase compared with last year when rental growth was at just 1.4 per cent.
The highest rental growth was found to be in Nottingham where rents had risen by 5.8 per cent. York and Bristol both experienced rents rising above 5 per cent in the last year.
Why is rental growth so high?
The rapid rise in rents is a result of the continued squeeze on the supply of rental homes.
Over the last two years, Zoopla has seen a 4 per cent rise drop in the number of properties available to rent. However, in the last year alone demand for rented homes has increased by 8 per cent.
‘A lack of supply and real wage growth is behind the increase in average rents across the country over 2019,’ explains Richard Donnell, research and insight director at Zoopla.
‘New investment by landlords has fallen since the introduction of tax changes in 2016 and this has been felt most keenly in southern England where property values are highest and yield lowest,’ he adds.
Some good news…
However, while rents are on the rise, they are still running below the average growth in earnings. That means while rents might be higher, the average renter is still spending 31.9 per cent of their annual earnings on rent – the same as in 2018.
Zoopla’s predictions for 2020
‘We expect the acceleration in rental growth to moderate over the first half of 2019, which is typically a period of slower rental market activity,’ predicts Richard Donnell.
‘We expect rents to increase by 3.5 per cent over 2020 as a lack of supply supports faster growth.
‘With further policy changes expected from the Government to provide more security of tenure for renters we expect the supply of rented homes to remain constrained,’ he adds.
However, if earnings continue to grow at the same rate as they have over the last three years this shouldn’t have an impact on the affordability of rental properties.