Gloomy forecast for tenants as rent rises set to speed up
The cost of renting is expected to rise by 4% or 5% a year by December, according to property website Zoopla.
Gloomy outlook for tenants as rent increases are set to pick up
The cost of renting a home in the UK has sped up again after a three-year slowdown, with tenants warned that more pressure is likely ahead.
Average rents for new tenancies rose 2.6% in July compared with the same month a year earlier, according to property website Zoopla.
That is still below the pace of inflation overall, but the property portal expects annual rent growth in privately rented homes to reach 4% or 5% by the end of the year.
It said there were fewer homes available to rent and that, with would-be first-time buyers discouraged by higher mortgage rates, competition for rental properties in some areas had become more intense.
"Our latest report shows how sensitive the rental market is to even modest changes in how many homes are available for rent," said Richard Donnell, executive director at Zoopla.
"Growing the number of homes for rent through increased investment is the most sustainable route to boosting choice for renters and ensuring stability in rent levels over the long run."
The Renters' Rights Act came into force in England at the start of May, and was described as the biggest shake-up of the sector in more than 30 years.
Separately, the pace of rent increases has eased recently. Zoopla data shows it dropped to a low of 1.6% in February.
But since then, the number of homes on the market for renters has tightened, with 3% fewer available than a year ago.
In addition, each listing now attracts an average of more than five enquiries. That is far below the long queues for properties after the pandemic, but it is still the most intense competition seen for nearly two years.
The Zoopla report said rental demand was especially strong in London.
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It said rent rises were being recorded across the UK, but the picture still varied depending on where renters were searching.
"In less expensive areas, renters have more capacity to absorb rent rises before hitting an affordability ceiling, whereas in the most expensive areas, rents are already stretching what renters can pay, capping how much further rents can increase," the report said.
It forecast another acceleration in rent rises to 4% or 5% by the end of the year, although that would still roughly match the average annual increase in workers' earnings.
Zoopla said new investment in homes to rent by landlords was "still muted as a result of higher costs and more regulation".
Nathan Emerson, chief executive at Propertymark, which represents lettings agents, said the report highlighted the need for more high-quality rental homes.
"A sustainable private rented sector requires the right conditions for responsible landlords to invest for the long term," he said.
"Increasing supply must remain a priority if we are to give tenants greater choice, improve affordability and create a more stable rental market."