Amid an ongoing housing crisis, rental affordability in the United Kingdom has worsened to its lowest point in a decade, according to Zoopla’s latest quarterly Rental Market Report.
The report highlights that the proportion of gross earnings needed to cover the average rent now stands at 28.4%, compared to a 10-year average of 27.2%. This deteriorating scenario is attributed to the continued outpacing of rent increases over wage growth.
The bleak landscape is compounded by data showing that average rents have surged by £110 per month over the last year, an annual increase of £1,320. In the past three years alone, new tenants have faced a cumulative hike in rent averaging £2,772 per year, further intensifying the cost-of-living pressures.
The market imbalance is further exacerbated by supply constraints. Rental supply is down 30% from the typical inventory for this time of the year. Estate agents currently have an average of just 10 rental listings, compared to a pre-pandemic average of 16.5.
Interestingly, despite the decline in available properties, demand for rented homes is 20% lower than last year but still maintains a staggering 51% above the five-year average. This incongruity between supply and demand prevails across all regions of the UK, setting the stage for a turbulent rental market.
Scotland has emerged as the region with the fastest-growing rents, recording a 12.7% increase. The introduction of rent controls in September 2022, which capped rent hikes for existing tenancies at 3% per annum, has had an unintended consequence.
Landlords, now restricted from raising rents for ongoing tenancies, are setting higher rents for new leases to offset costs and account for future limitations.
Richard Donnell, executive director at Zoopla, said: “The rented sector is stuck in a seemingly endless cycle of low supply and strong demand which has kept rental growth in double digits for 18 months in a row.
“Rents continue to rise faster than earnings, worsening rental affordability for renters looking to move. Rents are set to rise 9% over 2023 with the pace of rental growth shaped more by the affordability of renting, and how renters adapt to higher rents, than major shifts in supply or demand.”
