Latest insight on the UK Rental Market based on Zoopla’s Rental Index
UK rental growth at 13-year high Average UK rents are up 4.6% on the year at the end of September, after climbing by 3% in Q3 as demand rebounded in city centres and strengthened around the country. Average UK rents excluding London are up 6%, the highest level in 14 years.. The resumption of more ‘normal’ life; offices, restaurants and bars, cinemas and theatres and other amenities re-opening - as well as students looking for accommodation, has led to strong rebound in rental demand. This has coincided with the seasonal uplift in activity in the rental sector, with a resulting uplift in rents.
The increased demand for a rental home comes as supply remains low, with total stock levels some 43% below the five-year average, putting upward pressure on rents. On a regional basis, rents in the South West of England climbed 3.3% between June and September, and are now up 9% on the year, making it the region registering the fastest rental growth in Q3. Some areas in the South West have seen real pressure on the supply of rental properties amid higher demand, especially during the pandemic, as some households looked to move to more rural and coastal areas. The average time to let out a property (between listing and rent agreed) was below 10 days in the South West in Q3 – the only region where this is the case. And rents in Purbeck, in Dorset, are up by 16.2% on the year, the UK’s highest rate of rental growth. Rental growth is close to, or at 10-year highs in most regions across the UK, except London and Scotland, as rental demand continues to outstrip supply.
London’s annual rental growth is lagging, and even though rents have become more affordable, it remains the least affordable rental market in the UK. However, the marked resurgence of rental demand in central London mean rents rose by 4.7% during Q3 alone. Activity in the London rental market also rose markedly during Q3, with tenancies agreed running 50% above the five-year average, underlining the bounce back in the market. We expect the rebound in London rents to continue, but even so, the falls over the last 15 months means that average rents are still 5% lower than they were at the start of the pandemic. In the UK’s other major cities, the swing back to the city centres is clear, with rental demand in the central zones of each of the cities in the chart below at least double that in Q1 this year, except Edinburgh, where the rise was +60%. This is reflected in the strong rental growth seen in Q3. Rental growth in the outer zones of cities remains steady, reflecting the pandemic appetite for rental property in the wider commuter zones.
• Strong rental demand in Q3 pushes rental growth to the highest level in 13 years
• UK rents are rising at +4.6% per annum, amid a doubling of demand in major city centres
• London rental growth swings back into positive territory after 16 months of falls, as offices and city life resumes
• Rental demand will remain higher than supply – the availability of properties to let is 43% below the five-year average
• Even with rental growth, affordability of rents across the UK remain in line with the five-year average, at 37% of income
• Rental growth in the UK excl London is at +6%, and we expect this growth to ease to 4.5% by the end of 2022
• We expect London rental growth to be at 3.5% at the end of 2022