Rental unaffordability has hit its highest level for a decade, with prices rising at the fastest rate in London, according to Zoopla’s UK rental market report.
Zoopla stated that rental growth was fuelled by a “chronic imbalance” between supply and demand in the rental market.
In the summer, Advantage wrote that: “While the under-supply of houses available to buy has dominated the headlines in recent years, property experts are increasingly highlighting the (sometimes more acute) shortage of rental properties in prime locations, which is driving up prices at record rates in some areas.
“As house price growth softens, we may be about to read a little less about rocketing house prices and a little more about would-be tenants competing to secure rental properties in the most in-demand postcodes.”
Rental price growth is outpacing earnings
This trend of softening house prices and rising rental prices has continued throughout the year, and Mortgage Solutions reported that according to Zoopla’s UK rental market report, rental growth has outpaced earnings since June last year, and rents have increased by 12.1 per cent in the 12 months to October. This is equivalent of £117 per month, or £1,400 a year.
Zoopla continued that if rental growth continued at its current pace of 12 per cent into next year the proportion of earnings needed to pay rent could be stretched to 37 per cent.
“This is not likely or feasible and we expect the growing unaffordability of renting to hit spending power,” it added.
“The demand for rented homes is only going to rise in the medium term”
The report said that policymakers “need to better understand the rental market as well as the forces and factors shaping the overall availability of supply”.
It explained: “The demand for rented homes is only going to rise in the medium term, so it’s important we encourage more supply from all forms of landlords, whether private individuals or large corporates. It is important that policymakers encourage good landlords of all types and sizes to stay in the market and deliver much-needed supply.
“Only by increasing investment in the private rented sector can we ease the affordability pressures on renters in the medium term and make for a more sustainable rental market.”
Back in 2019, Advantage looked at how a shortage of homes available to let had led to rents reaching record highs across much of Britain. At that time, Money Expert stated that: The Royal Institute of Chartered Surveyors has reported that in order to meet growing demand, around 1.8 million new rental homes must enter the UK market within the next 10 years.
Three years later, much has been written about the need to address the shortage of homes available to buy or rent, and Housing Minister Felicity Buchan has written to MPs expressing concern at the chronic shortage of homes to rent in the private rented sector amid an ever widening supply-demand imbalance in the market.
However, despite mounting pressure from those struggling to rent or buy, and from some prominent figures within the public and private sector, setting housebuilding targets remains a contentious issue within the Conservative party, and there are no signs that the under-supply of rental properties is likely to ease in the short or medium term.