Outside of London, average monthly asking rentals for new tenants have reached a fresh high of £1,162. (pcm). As new asking rents continue to grow quickly, this quarter's increase of 3.2% marks only the third time in history that rentals have increased by 3% or more in a quarter.
Meanwhile, the average asking rent in London reached a new high of £2,343pcm. The capital now has the greatest annual rate of increase of any area on record for asking rent rise, at 16.1%. Due to the acute lack of rental properties available and the extremely strong demand, which continues to outpace levels from last year in every region of the UK, the rate of asking rent rise is largely due to these two factors.
Demand has increased by 20% since last year, although there are 9% fewer rental homes overall. Tenants seeking a place to live are facing tougher competition as a result of this growing disparity between supply and demand. However, it does at least provide tenants in many locations more choices compared to last year, even if they are highly likely to still be fighting for the property with many other renters. There is still some work to be done to close the gap between supply and demand sufficiently to stable new asking rents.
Recent increases in mortgage interest rates mean that even with record rents, the average monthly mortgage payment for a new first-time buyer putting down a 10% deposit is now 20% - or £1,121 pcm - higher than the rental payment for the same kind of home.
Some first-time buyers who can no longer afford the house they wanted or have chosen to wait in order to try to gain a clearer perspective of the market may elect to prolong their tenancy as a result of the increase in mortgage interest rates. This would add to the already strong pressure on the demand for apartments and other smaller rental units at a time when such demand is particularly high. The most popular form of apartment for tenants is a studio apartment, which has surpassed one beds.
Prior to the epidemic, studio apartments were more often sought after; however, when the market reopened in May 2020, one-bedroom apartments overtook them, momentarily decreasing demand for city life. There are already four times as many renters seeking for a studio property as there are studio flats available, increasing tenant competition for available studios by 71% over last year.
As more renters search for the cheapest home available without giving up the city centre location rather than perhaps earning more for their rent further afield, agents claim that tightened budgets and the resurgence of city centres are contributing to the trend.
Tim Bannister of Rightmove stated: "Renters now face a significant issue as there are just not enough rental houses available to fulfil the demand from consumers making inquiries.
“Whilst it’s positive news that most areas are seeing more properties coming to market, with London the notable exception, ultimately the gap between supply and demand is becoming wider across the board. We will need a significant addition of homes to come onto the market to even begin to balance the scales.
“Those looking to rent a smaller property in the next few months may find that they face some added competition from would-be first-time buyers, who have had their purchase plans scuppered for now due to the sudden rise in mortgage interest rates, and are now looking to rent.”