How fast are rents rising near you? Tenants face biggest increases in three years with Bristol, Nottingham and York hit hardest
- Rents in Britain grew by an average of 2.6%, data shows
- It’s the highest rate of growth in three years, with typical rents at £886 a month
- Zoopla said the rise is due to supply and demand in the rental market
Rents are rising at the fastest pace for three years, with Bristol, Nottingham and York all seeing rises of 5 per cent, data shows.
The average cost of a letting in Britain rose by an inflation-busting annual rate of 2.6 per cent during the last three months of 2019, property website Zoopla says.
It is the highest rate of growth in three years and compares to CPI inflation of 1.3 per cent. It means average rents now stand at £886 a month, up from £700 a decade ago.
Rents in Britain grew by an average rate of 2.6%, said property website Zoopla
Zoopla attributed the significant increase to a mismatch in supply and demand in the rental market.
It said there had been a 4 per cent contraction in the supply of homes available to rent in the past two years, while demand for rented homes has increased by 8 per cent in 2019.
The rise comes despite strong first-time buyer numbers, which recently made up more than half of home buyers. rents typically increase at a slower rate when first-time buyers are on the rise.
A lack of investment in rental properties has occurred since 2016 when landlords began responding to tax changes and lower yields in the South.
As well as the amount of tax relief that landlords could claim on their mortgage interest being restricted, a 3 per cent stamp duty surcharge was also introduced.
Rents in York (pictured) have risen 5 per cent year on year to an average of £844 a month
Rents in Bristol (pictured) have risen 5.5 per cent year on year to an average of £983 a month
Rents in Nottingham (pictured) rose 5.8% year on year to an average of £679 a month
While the rate of growth in rents has increased, it continues to run below the official growth in average earnings of 3.8 per cent, Zoopla said.
The growth in average earnings has outpaced the growth in rents for the last three year, which has improved rental affordability.
However, the affordability of renting varies widely across Britain, with Zoopla saying that the average tenant spends 31.9 per cent of their annual earnings on rent, which is unchanged from a year ago.
Rents in Edinburgh (pictured) rose 3.5% year on year to an average of £950 a month
At a city level, rental growth varies from a rise of 5.8 per cent in Nottingham to a decline of 2.9 per cent in Aberdeen.
And there are three cities where rents rose by at least 5 per cent, including York, Bristol and Nottingham.
All three areas have below average levels of homes for rent compared to the national average.
In Bristol and York, Zoopla said that the relatively high cost of buying a home is likely to be supporting rental demand and, in turn, rental growth – while in Nottingham, demand for renting has grown faster than the national average in 2019.
Rents in Leeds (pictured) rose 4.4% year on year to an average of £715 a month
By contrast, there are also three cities where rents have dropped, including Aberdeen, Middlesbrough and Coventry.
In Aberdeen, rents are falling at their lowest rate for 4 and a half years as rental supply starts to reduce.
Rental growth in Middlesbrough is also weak – as is the case across the North East – as weaker employment growth and affordable home ownership keep rental demand in check.
Weaker growth in Coventry is in contrast to the period between 2014 and 2016 when rental growth raced ahead by between 5 and 10 per cent a year, stretching affordability levels.
The supply of homes for rent per agent in Coventry is 20 per cent above the national average, which is keeping competition low between tenants and resulting flat rents in 2019.
Rents in Leicester (pictured) rose 3.7 per cent year on year to an average of ££727 a month
In London, rents fell in 2017 and 2018 due to lower demand, but they are now increasing by 2.8 per cent – the highest rate in the capital for almost four years.
The available supply of homes for rent in London, per agency branch, has declined by 20 per cent in the past two years.
Zoopla said this is due to much lower new investment by landlords, with some landlords leaving the sector altogether, while tenants are stay in their homes for longer.
The lack of supply is helping to push up rents – although the ability of tenants to afford these higher prices is being stretched.
It means the level to which rents can increase in the capital compared to other cities is limited. In other cities, there is more headroom in rental affordability to allow for higher rents.
In the past decade, the average rent in Britain has risen from £700 a month to £886 today, an increase of 27 per cent, according to Zoopla.
This is in line with the growth in average earnings in the same period, at 26 per cent.
The highest growth seen in a city during the past decade is in Edinburgh, where rents have increased 50 per cent, followed by Bristol at 45 per cent and Coventry at 45 per cent.
Similar to Coventry, Edinburgh has seen a slowdown in the pace of rental growth in the past 18 months with growth running at 3.5 per cent as affordability levels limit the scope for rental growth.
Richard Donnell, of Zoopla, said: ‘We expect the acceleration in rental growth to moderate in the first half of 2019, which is typically a period of slower rental market activity.’
But he added: ‘We expect rents to increase by 3.5 per cent in 2020 as a lack of supply supports faster growth.
‘With further policy changes expected from the Government to provide more security of tenure for renters we expect the supply of rented homes to remain constrained, which will support rental growth in 2020.
‘With robust earnings growth, the impact on rental affordability will be muted.’
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