Rental prices have hit another new record, according to property website Rightmove.
Average advertised rents have reached £1,316 per calendar month outside London, an increase of £91 or 7 per cent compared to last year, when the average rent was £1,225.
In the capital, the average rent is now £2,652 a month, up £92 or 4 per cent from £2,560 a year ago. In percentage terms, this is the region that has seen the smallest increase, along with Wales.
Rightmove is therefore calling on the next government to build more housing to make the increase in rents more “sustainable”.
Supply and demand: Rightmove says 120,000 more rental homes are needed on the market for rental growth to return to more normal levels of around 2% per year
While rents are still rising, they are doing so more slowly because there are more properties available, meaning landlords can set more competitive prices.
The pace of rent growth has slowed from its peak of 12 percent two years ago, though it is still higher than the more normal level of around 2 percent annually seen before the pandemic.
According to Rightmove, there are still not enough homes to satisfy the number of tenants looking to move.
Their analysis suggests that an additional 120,000 rental properties are needed to slow rent growth to 2 percent annually, based on the current level of demand.
Rents rise most in the North East of England
Rents have risen faster in some parts of the country, with some regions experiencing double-digit growth.
For example, in the North East of England, the average asking rent has risen 11 per cent year-on-year, from £808 a month to £894.
In the West Midlands, where average rents are now £1,180 a month, they are up 10 per cent on the same period last year, equivalent to a monthly increase of £109.
According to Rightmove, Scotland is currently the country most affected by imbalances between supply and demand, as tenants compete fiercely for limited stock.
Until recently, Scottish landlords were only able to increase rents on their existing leases by up to 3 per cent unless they received special permission.
However, the cap was lifted from March 31 and means rental costs will once again be under the control of landlords, 18 months after the first price freeze was introduced.
Despite rent controls, average advertised rents in Scotland have risen by 9 per cent year on year.
Meanwhile, rents in London are now 4 percent higher than last year. The same is true in Wales.
London had been experiencing a rental boom throughout 2022 and 2023, but now, thanks to an improving balance between supply and demand in the capital, prices appear to be cooling in most areas.
Change of pace: Rents in London are now 4% higher than last year, the smallest increase of all regions, after having been the region with the largest increase over the past two years
The next government “must build housing to reduce rents”
Rightmove property expert Tim Bannister believes the next government must streamline the planning process, speed up house building and offer incentives to landlords to invest in more homes.
He said this would improve the imbalance between supply and demand in the rental market and ensure that rental prices stop skyrocketing.
“We’ve been talking about the imbalance between supply and demand in the rental market for a long time,” Bannister says. “It’s easy to forget that there was a time before the pandemic when rental price growth was more stable.
‘Double-digit annual rent increases were not sustainable and while there has been some improvement in the relationship between supply and demand, 7 per cent price growth suggests we are still out of balance.
‘In fact, our analysis shows that we would need an additional 120,000 properties in the rental market to achieve a more sustainable level of rental growth of around 2 percent per year.
‘The next government should prioritise improving the planning process, speeding up housing construction and encouraging greater supply in the rental market.’
The biggest imbalances between supply and demand
Nathan Emerson, chief executive of Propertymark, the estate agents’ association, agrees with Bannister.
He said: ‘Propertymark has long argued that the private rental sector needs more homes to stabilise rental prices, but there are a host of other factors that can contribute to making the market more attractive to both investors and tenants.
‘With a general election this week, we would like to see the next government reform the tax system so that more investors can be persuaded to invest in the private rental sector and reduce rents for long-term tenants.
‘While we support increased housing supply, there needs to be a sensible and workable programme that takes into account the protection of the green belt wherever possible.
“They would also be wise to avoid rent controls which have had a devastating effect on the private rental sector in Scotland.”
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