The latest snapshot of the rental market from Rightmove reveals that average advertised rents for tenants outside of London have reached a new record of £1,316 per calendar month.
In London, average advertised rents are now £2,652 per calendar month.
The new record means that average advertised rents outside of London are now 7% higher than at this time last year. Whilst the pace of rent growth has eased from its peak of 12% two years ago, it is still much higher than the more normal level of around 2% per year seen before the pandemic.
Rightmove’s analysis shows that approximately 120,000 more rental properties are needed onto the market to achieve this more sustainable level of 2% rent growth per year, based on the current level of demand.
The imbalance between supply and demand from tenants enquiring about homes is one of the key drivers behind the rapid increase in advertised rents since the pandemic, with nowhere near enough homes to satisfy the number of tenants looking to move.
Scotland is currently the hardest hit by supply and demand imbalances, while London is the least affected.
An improvement in the balance between supply and demand in London has contributed to a slowing of rental price growth.
At this time in 2022 and 2023, London saw the joint biggest increases in yearly rents, following a significant widening in the gap between supply and demand during the pandemic.
A decrease of 15% in the number of tenants looking to move in London, and an increase of 16% in the number of available properties to rent in the capital, means that London has seen the biggest overall improvement in supply and demand compared to this time last year.
The result is that rental price growth in London has slowed from its peak of 18% in 2022, to 4%, the joint smallest yearly rise of all areas in Great Britain.
Rightmove is calling on the next government to streamline the planning process, accelerate housebuilding, and provide incentives for landlords to invest in more homes for tenants, to improve the supply and demand imbalance in the rental market and ensure that growth in rental prices is sustainable.
Tim Bannister, Rightmove’s property expert, comments: “We’ve been talking about the imbalance between supply and demand in the rental market for a long time now, so it’s easy to forget that there was a time before the pandemic where rental price growth was more stable.
“Double-digit yearly rent increases were not sustainable, and, whilst there has been some improvement in the ratio between supply and demand, price growth at 7% suggest we are still out of balance.
“In fact, our analysis shows we would need 120,000 more properties on the rental market to achieve a more sustainable level of rent growth of around 2% per year. The next government should be prioritising an improvement to the planning process, an acceleration of housebuilding, and encouraging more supply into the rental market.”
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Rents have kept up with inflation and are actually cheaper ‘in real terms’ than 2016, 4.6% cheaper.
Whilst the uncertainty is definitely driving landlords out of the market, the other factor that I don't see being mentioned is that landlord's were very good at not increasing rents during covid and the following cost of living crisis, so things are now having to catch but it has just been exacerbated by the increase in interest rates hitting landlords, which is causing as many of them to exit the sector as the uncertainty about what any government is going to do next to make it less attractive for them - it is just a perfect storm.
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