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Acute demand pushes rental growth to new high

‘Acute rental demand’ over the three months to September 2021 has pushed UK rental growth to its highest level since 2008, Zoopla has reported.

And the upward pressure is set to continue, said the property portal. Demand is continuing to outstrip supply which is running at 43 per cent below the five-year average .

On average UK rents are now 4.6 per cent higher than a year ago – 6 per cent if London is excluded from the calculation – and 3 per cent up in the last quarter alone.

Even London rents are showing signs of recovery. After 15 months of consecutive falls, London’s rents increased by 4.7 per cent between June and September.

‘The market is being shaped by an ongoing supply and demand imbalance, with demand continuing to outstrip supply’, said Zoopla. 

‘The imbalance has been compounded by both long-term structural issues such as landlord divestment following the 3 per cent stamp duty levy introduced in 2016, and more the immediate post-lockdown demand, which collectively have eroded available supply’.

Rental growth is also explained in part by tenant demand moving up the price bands. This reflects the continuing search for space, which has not only characterised the sales market, but the rental market, too, said Zoopla.

The regions registering the highest levels of rental growth are among those that are the most affordable when compared to the UK average, and as such, there has been more headroom for rents to increase. 

‘Rental growth is close to, or at, a 10-year high across most UK regions – except for in London and Scotland. Rents are up most in the South West, 9 per cent year on year, followed by Wales, 7.7 per cent,  and the East Midlands, (6.9 per cent .

‘In many of the UK’s largest cities, annual rental growth is running well ahead of the five-year average rate of growth. Bristol leads with 8.4 per cent growth in the year to September, followed by Nottingham at 8.3 per cent, and Glasgow at 7.2 per cent.

Rental demand in the central zones of Manchester, Edinburgh  and Leeds has at least doubled over Q3 compared to Q1, and in Birmingham demand has increased by 60% – buoyed by the return of office workers and students, and the lure of city life.

‘The swing back of demand into city centres, including London, has underpinned another rise in rents in the third quarter, especially as the supply of rental property remains tight’, said Zoopla head of research Gráinne Gilmore.

‘Households looking for the flexibility of rental accommodation, especially students and city workers, are back in the market after consecutive lockdowns affected demand levels in major cities. Meanwhile, just as in the sales market, there is still a cohort of renters looking for properties offering more space, or a more rural or coastal location’.