Annual growth in rental values continues to increase in the traditionally busy summer months, with little sign of an imminent slowdown. This is according to Nicky Stevenson, Managing Director of Fine & Country, who adds that as a result, affordability remains stretched, with renters expanding their search areas.
“In the prime market, average rents have risen 11% year-on-year. The North East and South East are the only regions where the average price of a prime monthly rental is lower year-on-year. According to Rightmove, demand per rental property is 162% above May 2019 levels, leading to fierce competition and more than a quarter of properties being let above the listing price,” Stevenson comments. “Zoopla report that with rents having risen faster than average earnings for the last 21 months, affordability is tight. According to the ONS Opinions and Lifestyle Survey, 15% of renters say it is very difficult to pay their rent, a jump from 10% in November last year. As a result, renters are being forced to change their search behavior, with Rightmove reporting a 50 km2 increase in rental search areas.”
Stevenson notes that the supply demand imbalance remains. “Despite the supply of homes for rent being unlikely to significantly improve in the near term, a slowdown in the sales market may help. Fewer landlord sales and owners renting out homes as they wait for any price falls to pass could marginally boost rental stock. Although a steady stream of landlords are indeed leaving the sector, Zoopla report that this has been the case since 2018, and the trend is not accelerating,” she adds.
“The rental sector remains strong as a medium-to-long-term investment, with more than one in four landlords with over five properties planning to expand their portfolio over the next year. According to the Royal Institution of Chartered Surveyors, rental growth of 6% per annum is predicted over the next five years,” Stevenson concludes.