Rents hit new record & city tenants down-size to studio flats
• National average asking rents outside London have hit a new record, now £1,162 per calendar month (pcm): o Asking rents jump by more than 3% this quarter (+3.2%) for only the third time on record o Average London rents rise to £2,343 pcm, leading to the biggest ever annual jump of 16.1%
• More new rental properties are available in every region except London, easing some of the pressure on supply in some areas, however demand still greatly outweighs the number of homes available to rent: o Tenant demand is up 20% compared with last year, and available properties to rent is down 9% o Competition among tenants to secure a property is at a record high
• Jump in mortgage rates for new first-time buyers could mean some aspiring buyers stay renting for longer, which will place further strain on the number of available homes
• Studio flats have overtaken one-beds as the most in-demand flat type for renters, with agents suggesting stretched budgets and the returning popularity of city centres are contributing to the shift: o There are now four times as many tenants looking for a studio flat as there are studio flats available, a 71% increase on a year ago
Average asking rents for new tenants outside of London have risen to a new record of £1,162 per calendar month.
This quarter’s increase of 3.2% is only the third time on record that rents have increased by 3% or more in a quarter, as new asking rents continue to rise rapidly.
In London, average asking rents rise to a record of £2,343 pcm this quarter. This puts the annual rate of asking rent growth in the capital at 16.1%, the highest yearly rate of growth of any region on record. The pace of asking rent growth is primarily down to the severe shortage of available rental properties, combined with extremely high demand which continues to surpass even last year’s levels in every region and country of Great Britain.
Demand is up by 20% compared with last year, while the total number of available properties to rent is down by 9%. This widening gap between supply and demand is creating ever fiercer competition between tenants looking for a home.
In London, the number of new properties becoming available to rent is down by 24% on last year, while every other region and country in Great Britain has seen a jump in new properties to rent, most significantly in the South West (+19%), Yorkshire & The Humber (+12%) and Wales (+10%). There is some way to go to narrow the gap between supply and demand enough to steady new asking rents, however it does at least give tenants in many areas some more choice compared with last year, though they are very likely to still be competing for the property with many other renters.
Recent mortgage interest rate rises means that even with record rents, the average monthly mortgage payment for a new first-time buyer putting down a 10% deposit is now a fifth (20%) more than the rental payment for the equivalent type of property - £1,121 pcm for the mortgage payment compared with £932 pcm to rent. A knock-on effect of the rise in mortgage interest rates could be that some first-time buyers who can no longer afford the property they wanted, or have decided to wait to try and get a clearer view of the market, may decide to extend their tenancy. This would place added pressure on the demand for flats and smaller properties to rent, at a time when demand for smaller properties to rent is already especially high.
Studio flats have overtaken one-beds as the most in-demand type of flat for renters. Studio flats were typically more in demand in the years leading up to the pandemic, however they were overtaken by one-beds when the market reopened in May 2020 and city living temporarily became less popular.
Competition between tenants for available studios is 71% higher than it was last year and there are now four times as many tenants looking for a studio flat as there are studio flats available. Agents suggest that stretched budgets and the returning popularity of city centres are contributing to the shift, as more tenants look for the cheapest property available without giving up the city centre location, instead of potentially getting more for their rent further out.
Rental price hotspots