UK rental growth went up 2.6% annually to £886 ($1,156) per calendar month in the last quarter of 2019 — the highest rate in three years, according to a new report by property website Zoopla.
This growth can be put down to a scarcity of supply and rising demand for rented homes. There has been a 4% drop in the number of homes coming to the market for rent over the last two years while the demand rose by 8% over 2019, creating upward pressure on rental values.
Some UK cities are seeing rents increase by 5% or more annually, with Nottingham seeing the steepest rise at 5.8%. Bristol comes in second with a 5.5% rise, followed by York at 5%.
All these cities have below average levels of homes for rent when compared to the national average. In Bristol and York, the relatively high cost of buying a home is likely to be accelerating rental demand and, therefore, rental growth. In Nottingham, demand for renting has grown faster than the national average over 2019, Zoopla found.
Average rents in London rose at their fastest rate in four years in 2019, going up by 2.8%. The average cost of renting in the capital is now £1,641 per month. These rent hikes reflect a “fundamental lack of properties to meet the overwhelming demand,” according to Marc von Grundherr, director of London lettings and estate agent Benham and Reeves.
The available supply of homes to rent in the capital has fallen by 20% since 2017 — a result of a drop in new investment by landlords and disinvestment by others, together with renters staying longer in their home, according to Zoopla.
Tax changes in recent years, which have eaten into landlords’ profits, mean the availability of rental homes across the UK has dwindled. At the same time, demand from tenants has increased, pushing rental prices upwards, according to the report.
However, rents are going down in three UK cities. Tenants in Aberdeen can expect to pay 2.8% less, rents in Middlesbrough are down 1.1%, and down 0.1% in Coventry.
Richard Donnell, research and insight director at Zoopla, said: “A lack of supply and real wage growth is behind the increase in average rents across the country over 2019.
“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 yields lowest. This is creating scarcity and explains why rents are rising in the face of increased rental demand as levels of employment continue to grow.”