Tag: Zoopla

Rent in Scotland is increasing at £41 per month

Rental growth to highs not seen since the Global Financial Crisis

  • 6% strong annual rental growth in Scotland.
  • The proportion of gross earnings used for rent falls to 17.3% for dual renters in Edinburgh.
  • Rental demand is strongest in London, Scotland and Wales with demand levels more than 65% above the five-year average. London’s market is also one of the most constrained when it comes to stock levels, with homes available to rent at just over half the 5-year average, creating the conditions for the sharp rises in rents.
  • Average UK annual rental growth has reached a 14 year high (+11%), with rents increasing to £995 in Q1 2021, an extra £88 a month compared to the start of the pandemic 
  • On average, UK tenants are staying in their rental properties for an extra five months compared to five years ago, with the average tenancy length up to 75 weeks, from 51 weeks at the start of 2017. 

The highest rental growth since the Global Financial Crisis, coupled with the cost of living crisis, is putting increased pressure on renters – according to Zoopla, the UK’s leading property destination, in its quarterly Rental Market Report. 

Higher rents and cost of living magnify  pressures faced by renters

Average UK annual rental growth has reached a 14 year high (+11%), with rents increasing to £995 in Q1 2021. This represents an increase of £88 a month compared to the start of the pandemic and follows a strong bounce back from 

last year, when average UK rents were down by more than 1%, despite wage growth peaking at 8.8% last summer. 

For renters, this has led to a significant increase in the proportion of gross income spent on rent, particularly in London where it has risen to a significant 52% for a single earner (a level not seen since March 2020).

This falls to 26% for sharers and means that a new let agreed for an average rental property in London will cost more than £20,000 in rent over the next 12 months – putting significant pressure on renters already dealing with the backdrop of the cost of living crisis.

In the UK as a whole, the average rent now accounts for over a third of gross income (37%) for a single earner. Around a third of renters live alone, according to the English Housing Survey. 

There’s also been a strong bounce back in rental growth in London from falls of 10% seen last year. Average annual rental growth in the capital rose to 15% at the end of Q1 – driven by demand for flats from students, office workers and international demand. 

Demand for rental property continues to outpace supply across the country, pushing up rents, although the rate of rental growth will slow through the second half of the year  

Stock constraints leading to longer tenancies

With renters facing increased pressure on their disposable income – there’s been a marked increase in tenants deciding to stay in their rental property for longer. 

On average, UK tenants are staying in their rental properties for an extra 5 months compared to five years ago, with the average tenancy length up to 75 weeks, from 51 weeks at the start of 2017. 

Interestingly, this trend has extended beyond lockdowns when the ability to move was hampered and indicates that landlords with tenants in situ may not be raising rents at the same rate as rental growth.

Rental demand is strongest in Scotland, Wales and London, with demand levels more than 65% above the five-year average. London’s market is also one of the most constrained when it comes to stock levels, with homes available to rent at just over half the 5-year average, creating the conditions for the sharp rises in rents. 

Rental markets remain highly localised

The rental market remains highly localised, with the most affordable rental markets for dual earners located in more rural areas including Great Yarmouth in the East of England, South Somerset in the South West and North East Lincolnshire in Yorkshire & the Humber. In these markets, average rents account for up to 15% of joint gross income.

In London, Bromley is the most affordable rental market, where average rents account for 19% of joint gross income. In the North West, Copeland, a local authority on the edge of the Lake District, encompassing the towns of Whitehaven and Cleator Moor is the most affordable rental market. 

Gráinne Gilmore, Head of Research at Zoopla comments: ““UK rental growth is being driven by high rental demand and limited supply, trends that are more pronounced in city centres.  The surge of post-pandemic pent-up rental demand will normalise through Q2 and Q3 however, which means rental growth levels will start to ease. 

“Affordability considerations will also start to put a limit on further rental growth although this may occur at different times depending on location. Rents are likely to continue rising for longer in areas which have the most constrained stock levels – currently London, Scotland and the South West.” 

Gareth Atkins, Managing Director, Lettings at Foxtons comments: “ “The tenancy renewal numbers we have seen so far in 2022 are unprecedented. Steadily increasing demand, severely limited stock and a swift rise in rental prices are all compelling reasons to renew – and renters are responding.

“Through Foxtons renewals department, we have seen a 29% rise in renewals year-on-year vs 2021. Renters are also choosing longer tenancies to avoid a market in flux; our deal length for renewals has gone up 9% in 2022, reaching an average tenancy of 15.7 months.” 

https://www.foxtons.co.uk/

Inner city Edinburgh sees rental growth of 7.2% year on year

  • Average annual UK rental growth* has reached a 13 year high, with rents increasing to £969 (+8.3%) in Q4 2021, up £62 per month since the start of the pandemic 
  • The average rent now accounts for 37% of gross income for a single earner – up from a pandemic dip of 34% during most of 2021 but broadly in line with the 10-year average of 36%
  • Overall, average rents are up nearly 12% over the last five years 
  • Demand for rental properties in January was 76% higher compared to the New Year market between 2018 and 2021 
  • The stock of rental properties currently available across the UK is 39% lower than the five year average around this time of year
  • Inner city London has seen a rental growth of 11% compared to the same time last year -but the decline in rents during the pandemic means this has translated into an increase of just £18 per month in rent compared to March 2020

Average UK rents are tracking at almost £1000pcm – £62 more than at the start of the pandemic – against a backdrop of increased living costs squeezing households, reports Zoopla, the UK’s leading property portal, in its quarterly Rental Market Report.

UK rents squeeze disposable household income as cost of living rises

The UK’s average rental growth has reached a 13 year high, up 8.3% in Q4 2021, meaning households who agree new lets are now having to pay an additional average annual cost of £744, compared to the start of the pandemic (March 2020). 

This increase means that a single earner can now expect to spend 37% of their gross income on rent, which is up from 34% during most of 2021. However, this now brings the figure broadly back in line with the longer term average of 36% as rental growth rises in line with wage growth.

Even with the current sharp rise, the overall increase in UK rents over the last five years totals 12% thanks to the decline in rents seen in some areas during the pandemic. 

Rental market shrinks as demand creates fast-paced rental landscape

The New Year has seen heightened demand for rental properties, up +76% compared to the New Year markets between 2018 and 2021. Yet the supply of rental properties recorded in January 2022 in the UK is 39% below levels typically observed at the start of the year. This is creating competition in the market,  with the imbalance of supply and demand ultimately spurring rental growth. 

As a result, properties are being snapped up. In London, this means renters are having to move quickly to secure the perfect property with the time to let now averaging a fortnight, down from three weeks in late 2020. 

This shrinking stock of homes for rent can be attributed to a continued decrease in buy-to-let investment over the last five years.. As rents rise, more renters will be choosing to stay in their properties, limiting stock turnover. With supply squeezed, it’s likely that continued demand will underpin more modest rental growth in the coming months, especially in city centres.

However, as the spike in demand falls back – hampered by the increases in household costs – it will reduce pressure on supply, ultimately driving more local competition to attract renters in local markets. 

City centre rents continue upward growth trajectory 

Pandemic trends saw strong growth in rental demand in wider commuter zones as renters embraced the ‘search for space’, but demand has now recovered across the central districts of all  major cities including Birmingham, Edinburgh, Leeds and Manchester in a reversal of recent behaviour. This is largely driven by pent up demand from office workers, students, and international residents and investors who are looking for city centre living. 

This is a normalisation of rental behaviour as demand once again rises in more central zones – seen most prominently in inner London with rental growth of 11% compared to the same time last year. But given the steep fall in London rents during the pandemic, this translates to an increase of just £18 per month in rent compared to March 2020.

Gráinne Gilmore, Head of Research, Zoopla, comments: “Rents have risen sharply in recent months, amid a backdrop of rising living costs. But it is important to point out that in terms of rental affordability, in most markets rents are still close to the 10-year average. As demand continues to outpace supply, there will be further upward pressure on rents, but affordability considerations will act as a brake on large rises. 

“In addition, the January peak in rental demand will start to ease in the coming months, putting less severe pressure on supply, which will lead to more local market competition, and more modest rental increases.  

“The flooding of rental demand back into city centres thanks to office workers, students and international demand returning to cities means the post-pandemic ‘recalibration’ of the rental market is well underway.” 

James Evans, CEO at Douglas & Gordon, comments: “Since the beginning of the year, we have seen a clear trend of people coming back to London and the office. This has contributed to around a 40% increase in new lettings applicants compared to the same month last year.

“As there is also still a very restricted supply of properties, we’re seeing landlords achieve record prices, a high quality of tenant and almost no void periods. With competition for properties at the level it is, there are 35-40 new applicants for every rental property in London and around four offers received per agreed let, so tenants are having to put themselves in the best position possible to get the properties they want. 

“Following a strong sales market in 2021, and more confidence in future price increases in London, we are seeing more buy to let investors entering the market. With some of the recent legislation changes, the need for a quality agent is even greater.”

* Based on new lets as recorded by Zoopla

UK rental growth hits 13 year high as demand increases in Scotland’s major cities

  • Acute rental demand over Q3 2021 has pushed UK rental growth to its highest level since 2008
  • Annual rent growth has increased by 7.2% in Glasgow and 3.6% in Edinburgh
  • Demand continues to outstrip supply, which is running at 43% below the five-year average – exerting an upward pressure on rents
  • Average UK rents are now tracking at +4.6% on the year [and 6% excluding London], after climbing 3% over the last quarter – with rental demand doubling in central Leeds, Manchester and Edinburgh and London in Q3 v. Q1
  • Rental growth is close to, or at, a 10-year high across most UK regions – except for in London and Scotland
  • After 15 months of consecutive falls, London’s rents have swung back into positive territory, rising by 4.7% between June and September, as offices reopened and city life resumed
  • The structural undersupply of rental properties across the country and the strength of the employment market will support rental growth into 2022
  • UK rental growth [excluding London] is set to ease slightly to 4.5% by the end of 2022

UK rental market growth has reached a 13 year high as renters rush back to city centres, reports Zoopla, the UK’s leading property portal, in its quarterly Rental Market Report.

Record price growth defines new era for the UK rental market

Acute tenant demand over the third quarter of 2021 has propelled UK rental growth to its highest level for over a decade [13 years]. 

The market is being shaped by an ongoing supply and demand imbalance, with demand continuing to outstrip supply, which is running at 43% below the five year average and exerting an upward pressure on rents. 

The imbalance has been compounded by both long-term structural issues such as landlord divestment following the 3% stamp duty levy introduced in 2016, and more the immediate post-lockdown demand, which collectively have eroded available supply.

Average UK rents are now tracking at 4.6% year on year, after climbing 3% over the last quarter. Excluding London, where the market has lagged, average UK rental growth has reached a 14-year high of +6%.

Rental growth is also explained in part by tenant demand moving up the price bands [see figure 1]. This reflects the ongoing search for space, which has not only characterised the sales market, but the rental market, too.

Figure 1

Affordability remains steady – despite pan-regional rises

UK monthly rents now account for 37% of an average income for a single tenant occupant; however, even with strong rental growth, the measure of affordability remains in line with the five year average [see figure 2]*.

The regions registering the highest levels of rental growth are among those that are the most affordable when compared to the UK average, and as such, there has been more headroom for rents to increase. 

Rental growth is close to, or at, a 10-year high across most UK regions – except for in London and Scotland. Rents are up most in the South West (9%) year on year, followed by Wales (7.7%) and the East Midlands (6.9%).

In many of the UK’s largest cities, annual rental growth is running well ahead of the five-year average rate of growth. Bristol leads with 8.4% growth in the year to September, followed by Nottingham at 8.3%, and Glasgow at 7.2%.

Rental demand in the central zones of Manchester, Edinburgh  and Leeds has at least doubled over Q3 compared to Q1, and in Birmingham demand has increased by 60% – buoyed by the return of office workers and students, and the lure of city life.

Figure 2

London rents rebound into positive growth – but remain lower than pre-pandemic levels

After 15 months of consecutive falls, London’s rents swung back into positive territory, up +4.7%, in Q3. This amounts to annual growth of +1.6% compared to falls of almost 10% at the start of the year.

As with other major UK cities, market activity rose significantly in Q3, with tenancies agreed in London running 50% above the five-year average, underlining the bounceback in the market as offices reopened and city life resumed.

Despite this upward trajectory, given the falls over the last 18 months, average London rents are still 5% lower than they were at the start of the pandemic.

Rents forecast to rise by a further 4.5% by the end of 2022

Looking ahead to the new year, the structural undersupply of rental properties across the country is expected to support rental growth into 2022. 

In addition, the supply shortage coupled with the strength of the employment market which, despite the pandemic, is set to remain robust, will in turn support demand and sustain rental growth.

While the level of rental demand might ease in the near term in line with seasonal trends, demand levels will  remain higher than usual, especially in city centres, where there is an element of pent-up demand being released.

On the supply side, rental stock will remain tight, amid lower levels of investment into the sector by landlords, and this will underpin rental pricing. There is more leeway for stronger rental growth in areas of the country where rents are relatively more affordable, suggesting that rents could rise above earnings outside of the south of England, supporting rental growth across the UK excluding London at 6% in 2021 and 4% in 2022. 

Meanwhile, London rental growth is expected to pick up to 3.5%, with rents ultimately exceeding pre-pandemic levels.

Gráinne Gilmore, Head of Research, Zoopla, comments: “The swing back of demand into city centres, including London, has underpinned another rise in rents in Q3, especially as the supply of rental property remains tight. 

“Households looking for the flexibility of rental accomodation, especially students and city workers, are back in the market after consecutive lockdowns affected demand levels in major cities. 

“Meanwhile, just as in the sales market, there is still a cohort of renters looking for properties offering more space, or a more rural or coastal location.” 

*The methodology Zoopla has used to calculate affordability has changed from the last quarter; Zoopla is now using ASHE data, and previously used the Labour Force Survey.

Zoopla Quarterly Rental Market Report: Renters revive central Edinburgh housing markets

  • One year on since the housing market reopened, and the Covid-led decline in rental demand for city centre housing is bouncing back
  • As the UK emerges from lockdown, renter demand is up 26% in central Edinburgh, 12% in central Leeds, 7% in inner London and 5% in central Manchester in the month since Easter
  • London’s rental demand is being fuelled in part by a sharp improvement to affordability; with rents down -9.4%, affordability is running at a ten year high
  • Average rents in the City of London, Kensington and Chelsea, and Westminster, are running at their lowest for a decade, with average Westminster rents running at £2,259 pcm – down from £2,617 pcm in February last year
  • By contrast, UK rents outside of London are up 3% on the year, signalling the highest level of growth in four and half years
  • Rents are rising fastest in the North East (+5.5%) and the South West (+5.3%) yoy – the strongest rates of growth in a decade in these regions amid increased demand and constrained supply
  • Rental performance outside of London is being driven by a 59% uptick in demand for rental properties in the 28 days to the end of April, compared to the average demand recorded during the same month in the more  ‘normal’ markets of 2017 -19

One year on since the housing market reopened and the Covid-led decline in rental demand for city centre housing is starting to bounce back, as the UK emerges from lockdown and affordability for renters improves.

These are the latest findings from Zoopla, the UK’s leading property portal, in its quarterly Rental Market Report:

City centre rental markets finally revived

The impact of Covid was felt most acutely in the city centre rental markets of the UK’s major regional cities. Central Edinburgh, Leeds, Manchester and London were at the forefront of the rental slowdown, as offices remained closed and an extended hiatus in tourism took hold. 

Stock moving over from short-term lets into the rental market, and more rental stock coming back to the market amid easing demand, led to a softening in rents in city centres, which are still down by  0.7% in Leeds, -1.1% in central Manchester, -3.2% in central Edinburgh and -9.9% in inner London (see figure 1).

However, the city centre downturn is starting to reverse as the economy opens up, workers start to return to their offices, leisure activities restart, and renters return in search of a rental bargain and restoration of their social life.

Renter demand is up 26% in central Edinburgh, 12% in central Leeds, 7% in inner London and 5% in central Manchester in the month since Easter – and is starting to absorb the supply surplus that characterised the market over the past year.

Figure 1: Rental growth in inner and outer cities in March 2021

Source: Zoopla Research

London’s rental affordability reaches ten year high

Rental declines in London bottomed out in February of this year, down -10% year on year, with overall London rents now running at -9.4%. Average monthly rents are now at the same level as they were in December 2013.

The fall in rents in London over the past year has resulted in rents being at their most affordable for ten years. Average rents now account for 42% of an average single-earner income in London, down from 49% in March 2020, and a peak of 53% in Q4 2016

Average rents in the City of London, Kensington and Chelsea, and Westminster, are running at their lowest for a decade, with the average monthly rent in Westminster at £2,259 – down from a high of £2,617 in February last year.

Many of London’s renters are looking to future-proof current rental affordability, locking in cost savings for as long as possible, with agents reporting an increased number of longer-than-average tenancies (in excess of 12 months) being agreed.

Regional rents rising 3% year on year – but affordability remains unchanged

The rental market outside of London paints a starkly different picture, with rents rising at 3% year on year, signalling the highest level of growth in four and half years (see figure 2).

Despite rent rises, average affordability remains broadly unchanged as wages rebound from the dip recorded last summer, keeping pace with rental growth.

Rents are rising fastest in the North East (+5.5%) and the South West (+5.3%) year on year – the strongest rate of growth in a decade in these regions amid increased demand and constrained supply. However, the North East remains one of the most affordable regions in the country, with average rents absorbing 21% of the income of the average single earner (pre-pandemic, compared to the UK average of 32%.

Northern towns of Wigan and Barnsley are seeing some of the highest rental growth in the country, at 8%, with Rochdale at 7.8%; this outperforms average annual rental growth in these towns of around 1.5% between 2011 and 2019 by some margin.

Current rental performance is being driven by a 59% uptick in demand for rental properties in the 28 days to the end of April, compared to the average demand recorded across the ‘normal’ markets of 2017 -19. In the first quarter of the year, demand for rental property outside of London was 32% higher than the same period last year.

Figure 2

The supply challenge

The supply of rental properties in most markets is failing to keep up with demand, and the new supply of property coming to the market outside of London is 5% lower than in Q1 last year.

Supply constraints are being driven by a multitude of factors. Firstly, many renters were unable or reluctant to exit the rental market and buy a property during the pandemic, limiting the flow of renters out of the sector, and absorbing more supply. At the same time, investment into the private rental market, which is predominantly made up of independent landlords, has not recovered to 2015 levels, before the additional 3% stamp duty levy was introduced for investors.

The number of properties purchased using a buy-to-let mortgage was 45% lower in 2020 than in 2015, and the number of homes in the private rented sector has fallen slightly since 2016 as landlords rationalise their portfolios in the face of tax changes and additional regulation.

Private outdoor space remains top priority for renters

Increased demand for private outdoor space has characterised renter behaviour throughout lockdown, but even as we emerge from pandemic restrictions, it remains a priority.

The proportion of renters searching for rental properties with gardens has doubled since the pre-pandemic period last year. The good news for renters is that nearly half of properties available to rent currently have a garden or access to a shared garden, and the number of these properties available to rent has risen during Q1 to levels seen last summer. 

David Ross, Managing Director, Hometrack, comments: ““Rental demand will continue to rise in city centres as offices start to re-open and this, coupled with increased affordability levels in many cases, will start to counter the negative pressure on rents seen over the last 12 months.

“In London, where rents are down 9.4% on the year, a modest reversal in rental declines has begun, but it will be a slow build back to pre-pandemic levels in inner London. 

“The recovery will be uneven and we expect new or recently refurbished properties to attract higher levels of demand in H2.”

Half of Edinburgh homeowners undervalue their homes by more than £28,000

Zoopla reveals the capital’s ‘Hidden Equity’

  • Half of Edinburgh’s homeowners undervalue their home by an average of £28,351
  • Two thirds of homeowners across Edinburgh have lost touch with the value of their home
  • More than half of homeowners in Edinburgh unlocked their ‘hidden equity’ to move to a nicer property

New analysis by Zoopla, the only property portal which offers a free instant online property price estimate, conducted as part of its inaugural Hidden Equity Survey, has found that homeowners in Edinburgh are undervaluing their homes by an average of £28,351.

The Hidden Equity Survey of 2,000 homeowners* who have had their home valued by an estate agent in the past three years establishes for the first time how accurate Edinburgh homeowners’ estimations of the value of their homes really are. It found that just one in three (33%) local homeowners have an accurate idea of the estimated value of their home.

Average home in Edinburgh worth £28,000 more than owners realise

The findings from Zoopla show that almost half of homeowners in Edinburgh (45%) who had their home valued via an estate agent or sold it in the past three years said it was worth more than they thought it was – on average by £28,351.

Bathroom bonus

When asked for their thoughts on why their homes were worth more than expected, two fifths (43%) of homeowners in Edinburgh attributed their good financial fortune to installing a new bathroom. Other popular reasons being given by homeowners in the city for their financial uplift included redecorating (41%) and work on the garden (32%).

Increasingly desired

The practicalities of improving a property aren’t the only reasons for homeowners in Edinburgh to get more for their home than they thought it was worth. Edinburgh becoming an increasingly desirable place to live has also helped to add value to the properties of homeowners, with a third (36%) of homeowners citing desirability of the city for homes being worth more than their owners expected.

The good life

For Edinburgh homeowners who went on to sell their home and benefit from their hidden equity, the financial boost had a significant impact, with the majority (84%) of homeowners saying the additional money ‘improved their lifestyle’. More than half (59%) said they were able to move into a better property than they expected as a result (for example, it had more bedrooms, was in a nicer area, had a garden etc.).

One in ten (12%) homeowners in Edinburgh used their extra cash to go on more holidays and a further one in ten (12%) gifted the money to their children to help their future plans.   

Different decisions

For Edinburgh homeowners who did not know the true value of their home until they got it valued by an estate agent, one in three (34%) said they would have made different financial decisions in the years prior if they had been aware of their hidden equity.

For property owners whose home was worth less than they expected, two fifths (43%) said they would have paid off more of their mortgage. Almost a third (29%) would have worked harder to build their savings rather than assume their home was accruing equity that they could draw on at a later date.

One in ten (14%) of homeowners in Edinburgh said they’d have spent less on non-essential purchases like jewellery, watches or expensive presents.

House prices rising

Zoopla has also revealed the latest House Price Index, which studies multiple local housing trends and prices on an annual basis. The data shows that the average house price in Edinburgh is now £241,000, with prices rising by 2.8% in the last 12 months. The data also shows prices in Edinburgh have increased cumulatively by 24.4% in the past five years.

Gráinne Gilmore, Head of Research at Zoopla, comments: “The direction of house prices has long been a staple of conversation around dinner tables across Edinburgh and many homeowners could be in for a lovely surprise if they have their property valued, according to our research.  

“Because of the impact of the pandemic, many households are re-evaluating how they want to live and this has had an impact on the local housing market. Buyer demand has soared, racing ahead of supply, putting upwards pressure on prices. House price growth in Edinburgh is currently at 2.8% annually.

“Edinburgh homeowners keen to check up on their property’s value should head to Zoopla’s My Home, where they can see an estimated value range for their property and check for potential hidden equity.

“For those keen to progress with a sale and perhaps unlock hidden equity, they can contact an estate agent using My Home to get an expert market valuation and personalised guidance on how to best navigate this busy housing market.”

Staying on top of a property’s value

As a first step, homeowners can check My Home on Zoopla.co.uk, where they can discover their home’s worth with an instant online estimate based on powerful market data. They can also keep track of their house price estimate and access a timeline of their home’s sales history.

My Home also allows homeowners to track the estimated value of other homes in their neighbourhood, as well as homes they might want to buy in the future. Zoopla is encouraging homeowners to get estate agent valuations of their home – the most accurate way to value a property – to see if they are sitting on more equity than they think.