Zoopla: Rental property drought means rents grow at twice the pace of wages

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on the Zoopla Renal Market Report, showing rental property drought means rents grow at twice the pace of wages.

Key points from publication:

• • The average rent has hit £1,078 a year – up 12% in a year – double the rate of earnings growth.
  • Rents are less affordable for single people than any time in ten years – accounting for 35% of their income.
  • The stock of homes for rent is 38% below the 5-year average while tenant enquiries are 46% above the 5-year average.
  • Renters are settling for smaller properties, with a rise in demand for one-bedroom flats.

Sarah Coles says:

“The rental property drought is driving rents sky high, rising at twice the rate of wage inflation, and swallowing an incredible 35% of the average single income. Landlords have been abandoning the market in droves, while tenants flock to it, leaving the rental market an arid wasteland, picked clean of properties.

“RICS has warned for months that landlords are selling up in huge numbers. New tenant rights and energy efficiency legislation will make living conditions better for renters, but they also mean that for many landlords the investment required means the numbers no longer add up.

“They’ve been selling out at market highs and cashing in their investment. The rise in mortgage rates was also tough on landlords, who need to cover their mortgage payments with room to spare in order to hit affordability rules, so this will also be forcing some of them out of business

“Meanwhile, the number of prospective tenants has boomed. Now, would-be buyers are swelling their ranks, as they wait to see what’s going to happen to the property market before taking the plunge. This not only means renters are staying put, but former homeowners are joining them, while they try to wait out market falls.

“There’s also a growing gulf between new rentals and renewed contracts – which are up a far more manageable 3.8%in a year. It means more renters deciding to stay in the same property, which makes life even more difficult for new tenants looking for a home.

“None of these trends look set to change in a hurry, so there’s a chance things will get even worse in the coming months. Renters will have to hope that falling house prices will persuade landlords that now isn’t the time to sell – despite what has happened to mortgage rates.

“The figures also show we’re seeing a reversal of some pandemic trends. There has been a boom in rents in big cities, which are enjoying a comeback after the pandemic exodus. Now more people are working from the office for at least part of the time, the reality of the commute is sending many tenants back to the city.

“Meanwhile, there has also been a rise in demand for one-bedroom properties. Unfortunately, this is less positive trend, because it’s largely the result of people being priced out of somewhere larger that may well have suited them better.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay