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Demand for UK Rental Properties High Despite Rent Increases

The private rental market is going from strength to strength as supply tightens and demand increases, new market figures have revealed. In comparison to the near-stalled residential sales market, UK property rentals have bucked the market trend, with rents rising 13.9 per cent over the last five years according to data from tenant referencing agency HomeLet.

The headlines from HomeLet’s Rental Index, show:

  • The average rent in the UK is up 1.8% (£17) to £941 since last year
  • When London is excluded, the average rent in the UK has risen to £781, this is up by 1.8% (£14) on last year
  • Average rents in London are up 0.9% to £1,611, which is £15 higher than last year
  • The average duration of tenancy for rented properties in June 2019 was 30.7 months, this is down from an average of 32.1 last month

Commenting on the above data, chief executive of HomeLet, Martin Totty, said: “What’s most striking about the latest data is the consistency of rental price increases UK wide, with all regions of the UK recording a year on year increase in average rental values. This is a continuation of the theme that we’ve seen since mid-2017, with average rents steadily increasing over this period.

This month has also been the first in a long time that the average duration of a tenancy has reduced. Our data shows that it has changed from an average of 32.1 months in May to 30.7 months in June. Whilst this isn’t a big change, the drop coincides with the reduction in tenant fees and could be an early indication of more mobility amongst tenants.”

One of the UK’s leading property portals Zoopla’s new Rental Market Report also confirms the fact that rents have risen this quarter, with its index showing UK rents are up two per cent on this time last year – the highest rate in three years.

Chart 1 – UK private rental growth (new lets, %year on year)

Source: Zoopla Rental Market report, powered by Hometrack

 

Not only does Zoopla’s new index track rental growth, the report also delves into the affordability of renting and has revealed that rents have risen at half the level of earnings growth – continuing a three-year improvement in the affordability of renting a property, which is a great pull for tenants.

Chart 2 – UK private rental growth – UK, UK excluding London and earnings (%year-on-year)

Source: Zoopla Rental Market report, powered by Hometrack

 

A selection of Zoopla’s key findings from this quarter (Q32019), show:

  • UK rental growth is up 2% annually to £876 in Q3 2019 – the highest rate in three years
  • The rate of rental growth is increasing as supply tightens and demand increases
  • The average single earner spends 31.8% of earnings on rent, down from a 2016 peak of 33.3%
  • Outside of London, renters spend the highest proportion of earnings in Oxford, Brighton and Cambridge; and lowest in Hull, Bradford and Stoke
  • Rents are rising fastest in Nottingham (+5.4% annually) Leeds (+4.5%) and Bristol (+4.5%)

 

Homes in London, Scotland and the South West rent the fastest

The Zoopla index also measured the time it takes to let properties across the UK finding homes took 17 days, on average, to rent. This is an improvement from one year ago, when homes took 19 days to rent. The report also found homes in the South West are let the fastest, averaging 13 days, followed by Scotland (15 days) and the East Midlands (15.7 days) while homes in the North East (22 days) take the longest to rent, followed by Northern Ireland (20.7 days) and the West Midlands (19.3 days) and Wales (19 days).

There were nine cities where homes took less than a fortnight to rent, with Brighton (13 days), Nottingham (12 days), Edinburgh (11.3 days), York (10 days), and Bristol (9 days) proving the fastest.

Richard Donnell, Research and Insight Director at Zoopla, commented: “The level of competition for rented property varies significantly across the UK. While homes in Aberdeen take nearly a month to rent [26.2 days], homes in York and Bristol take 10 days, signalling greater competition amongst renters. 

“The decrease in average time to rent for the UK is evidence of rising demand at a time when the rental market is seasonally stronger. Rising demand is feeding into faster rental growth, which we expect to moderate over Q4 2019 on a more modest increase in demand.” 

 

Table 1 – Summary of key rental market metrics – UK, country and regions

Area Average rent
(£pcm)
% yoy 2019Q3 % yoy 2018Q3 5 year CAGR Affordability – single earner – current Affordability – single earner – 5 yr average. Time to rent – current (days)
UK £876 2.0% 1.3% 2.0% 31.8% 32.7% 17.0
UK (ex. London) £725 1.9% 1.5% 2.3% 26.3% 26.9% 17.9
Country
England £900 2.0% 1.2% 1.9% 32.1% 33.1% 17.6
Scotland £625 2.9% 1.8% 1.8% 24.2% 24.2% 15.0
Wales £592 1.9% 2.5% 2.4% 24.5% 24.7% 19.0
N Ireland £587 1.8% 2.6% 2.8% 24.9% 25.6% 20.7
English Regions
East Midlands £638 3.2% 2.9% 3.1% 25.8% 25.7% 15.7
Yorkshire and Humber £578 2.8% 1.7% 2.2% 23.3% 23.9% 18.3
South West £787 2.6% 1.5% 2.7% 30.8% 30.6% 13.0
London £1,622 2.3% 1.3% 1.3% 45.9% 48.8% 16.0
North West £599 1.8% 1.0% 2.1% 24.2% 24.6% 18.7
Eastern £876 1.6% 1.0% 2.8% 30.2% 30.9% 17.3
South East £1,007 1.4% 0.8% 2.0% 32.9% 33.8% 18.0
West Midlands £660 0.8% 2.2% 2.7% 26.6% 26.8% 19.3
North East £503 0.5% 0.5% 0.5% 22.3% 22.8% 22.0

 

Table 2 – Summary of key rental market metrics – 40 cities

Area Average rent
(£pcm)
% yoy 2019Q3 % yoy 2018Q3 5 year CAGR Affordability – single earner – current Affordability – single earner – 5 yr ave. Time to rent – current (days)
Cities
Nottingham £661 5.4% 4.3% 3.9% 26.9% 26.1% 12.0
Leeds £707 4.5% 2.3% 3.4% 28.7% 28.8% 16.7
Bristol £962 4.5% 2.2% 4.1% 38.0% 36.6% 9.0
Belfast £604 3.6% 2.5% 3.5% 25.7% 26.1% 21.3
Edinburgh £946 3.5% 5.9% 5.2% 36.8% 34.4% 11.3
Leicester £705 3.4% 3.2% 3.4% 28.5% 28.4% 20.2
Derby £568 3.3% 1.5% 1.9% 23.2% 23.6% 13.7
York £807 3.3% 3.1% 2.5% 32.7% 33.4% 9.8
Brighton £1,284 3.1% 2.6% 3.0% 42.0% 41.7% 13.0
Sheffield £578 3.0% 0.9% 1.8% 23.4% 24.2% 16.7
Manchester £721 2.8% 1.0% 3.2% 29.3% 29.2% 15.7
Norwich £759 2.8% 1.8% 3.1% 26.1% 26.2% 14.3
Bournemouth £946 2.6% 0.9% 2.5% 37.2% 37.2% 14.5
Glasgow £631 2.5% 3.9% 3.5% 24.6% 23.9% 14.0
London £1,559 2.3% 0.9% 1.3% 44.4% 47.2% 16.3
Portsmouth £842 2.3% 0.6% 2.6% 27.6% 28.1% 13.7
Gloucester £689 2.3% 2.3% 2.8% 27.2% 26.8% 14.3
Cardiff £768 2.1% 2.6% 3.0% 32.1% 32.1% 17.3
Liverpool £573 2.1% 0.6% 1.9% 23.2% 23.6% 18.7
Northampton £752 2.0% 2.2% 3.6% 30.3% 30.5% 17.0
Swindon £734 1.9% -0.1% 3.3% 29.0% 29.1% 17.3
Plymouth £663 1.9% 1.3% 1.3% 26.1% 26.5% 13.7
Hull £469 1.8% 2.0% 1.7% 18.9% 19.5% 20.0
Stoke £511 1.8% 2.2% 2.0% 20.6% 20.7% 21.7
Reading £1,051 1.7% 1.6% 1.6% 34.4% 35.6% 19.3
Cambridge £1,194 1.5% 2.6% 2.2% 41.3% 42.1% 13.3
Bradford £486 1.5% 0.0% 0.9% 19.5% 20.7% 19.7
Huddersfield £514 1.3% 2.6% 1.7% 20.8% 21.7% 20.0
Ipswich £672 1.1% 2.7% 3.0% 23.2% 23.5% 16.0
Southampton £834 1.1% 0.3% 1.4% 27.4% 28.3% 15.8
Milton Keynes £918 1.1% 1.3% 2.7% 30.1% 30.8% 18.3
Southend £884 1.0% 0.8% 3.1% 30.5% 31.4% 18.8
Preston £561 0.9% 0.4% 0.6% 22.8% 23.8% 17.0
Oxford £1,343 0.8% 1.7% 2.3% 43.8% 44.9% 23.0
Birmingham £659 0.8% 2.2% 2.8% 26.7% 26.8% 20.7
Newcastle £566 0.6% 0.3% 0.8% 25.1% 25.6% 21.7
Swansea £591 0.1% 1.4% 1.6% 24.6% 25.4% 21.5
Middlesbrough £467 -0.5% -1.7% -0.2% 20.7% 21.6% 23.3
Coventry £800 -0.8% 1.8% 3.9% 31.9% 32.7% 17.3
Aberdeen £609 -4.1% -3.8% -8.3% 23.4% 29.0% 26.2
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Alex Wright, Editor