UK rental market roars ahead with decade-high growth in rents
8th September 2021
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UK rents outside London* are rising at their highest rate for over a decade, and currently tracking at +5% year on year
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Average rents for the UK excluding London are running at £790 pcm, up from £752 a year ago, amounting to renters paying an average of £456 more per year
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Rising demand for city centre living amid limited supply is putting upwards pressure on rents
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But average earnings are still rising faster than rents (+8.8%)**, meaning that rental affordability is holding steady for those in employment
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Manchester, Reading and Leeds have moved from negative to positive rental growth since March, while Wigan (10.5%) Mansfield (10%) and Hastings (9.9%) are are leading the pack of accelerated growth
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Meanwhile, rental declines in London have bottomed out as demand rebuilds and lockdown ends, permitting the reopening of offices and amenities
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While annual rental declines reached -9.4% in London in January, they recovered to -3.8% in July, signalling an ongoing return to stability
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Demand is expected to remain higher than typical levels for the rest of the year, while reduced stock will support stronger rental growth
Wednesday 8th September, 2021, London: Renters are rushing back to city centres after a pandemic-driven exit, reports Zoopla, the UK’s leading property portal, in its quarterly Rental Market Report.
Rents reach highest rate of growth since 2008*
The UK rental market has revved up amidst a sharp rise in demand for city living, driving the highest rate of growth outside London for over a decade. Driven by soaring demand in the UK’s major cities, amid limited supply, rents are tracking at +5% year on year across the country excluding London.
Monthly rents are averaging £790, up from £752 a year ago. This equates to renters paying an average increase of £456 per year.
But it’s not a story of rapidly declining affordability. The ONS recently reported that average earnings for those in employment are rising faster than rents, with an 8.8% rise in total pay year on year in June**.
At a city level, Manchester, Reading and Leeds have moved from negative to positive rental growth territory, while Wigan and Mansfield are leading the pack of accelerated rental growth - with double digit (+10.5% and +10%) growth.
Meanwhile, rental declines in London have bottomed out as demand rebuilds amid the ending of lockdown and the reopening of offices and amenities. While annual rental declines reached -9.8% in London in February, they recovered to -3.8% in July, signalling an ongoing return to stability.
Figure 1
Tenants rush back to city centres, boosting demand by a third
Demand for rental properties rose by 33% in August compared to the same period last year, and is tracking at 79% above the 2017-19 average.
This unprecedented rate of growth is driven by the post-lockdown reopening of cities, and a return among tenants to the city rental landscape.
While the rental market is seasonal, with July and August proving busy historically, current activity levels are unusually high, precipitated by students and returning city-dwellers.
That said, in August, the stock of property available to rent was around a third below where it would be typically at this time of year. The recent surge in renters has ultimately eroded supply, which was already declining.
Figure 2
Rental properties letting almost a week faster than in 2020
With supply and demand so out of kilter, competition is fierce for rental properties. Such an imbalance has resulted in the rental market moving at its fastest rate since 2016. At this present time, rental properties are securing renters, on average, within 15 days of coming to market.
Inner cities are showing the sharpest rise in demand, with Edinburgh registering the highest growth in demand levels since February of this year.
While demand for rental houses outpaced demand for rental flats at the height of the pandemic, demand for both property types is pegging level in another sign of demand in central cities, where flats tend to make up a larger proportion of stock.
Rental demand will remain higher than usual in the coming months, in line with seasonal trends, and the lower levels of stock will support stronger rental growth through the rest of the year.
Gráinne Gilmore , Head of Research, Zoopla, comments: “The rental data illustrates how city life is resuming - with a sharp increase in demand in central cities.
“The strong levels of rental demand seen across the UK during August will moderate in line with seasonal trends, but overall demand for rental property is likely to remain higher than usual in the coming months, amid this swing back to city life.
“As ever, much will be dependent on the extent to which the current rules around COVID continue as they are. But given no deviation from the current landscape, the demand for rental property, coupled with lower levels of supply, will continue to put upward pressure on rents. In London, this will translate into rental growth returning to positive territory late 2021 or early 2022.”
*Decade high growth in rents - UK excluding London
**Latest earnings data according to the ONS
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For further information, please contact PR Team on pr@zoopla.co.uk or +44 (0)20 3873 8770.
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