Rental prices have reached another new record high, according to the property website Rightmove.
Average advertised rents have reached £1,316 per calendar month outside of London, up £91 or 7 per cent compared to a year ago when the average rent was £1,225.
In the capital, average rents are now £2,652 per month, up £92 or 4 per cent from £2,560 a year ago. In percentage terms this made it the region that had the smallest rise, along with Wales.
Rightmove is therefore calling for the next Government to build more homes in order to make rent rises more ‘sustainable’.
Supply and demand: Rightmove says 120,000 more rental homes are needed on the market to bring rent growth back to more normal levels of around 2% a year
While rents continue to go up, they are rising more slowly thanks to more properties becoming available which means landlords may price them more competitively.
The pace of rent growth has eased from its peak of 12 per cent two years ago, though it is still higher than the more normal level of around 2 per cent per year seen before the pandemic.
There are still nowhere near enough homes to satisfy the number of tenants looking to move, according to Rightmove.
Its analysis suggests that 120,000 more rental properties are needed to reduce rent growth to 2 per cent per year, based on the current level of demand.
Rents rise the most in North East England
Rents have been rising faster in some parts of the country with some regions experiencing double digit rental growth.
For example, in the North East of England, the average asking rent is up 11 per cent year-on-year, jumping from £808 a month to £894.
The West Midlands, where average rents are now £1,180 a month, is up 10 per cent on this time last year equating to a £109 monthly uplift.
Scotland is currently the hardest hit by supply and demand imbalances, according to Rightmove, with renters competing fiercely over limited stock.
Up until recently Scottish landlords could only increase rents on current tenancies by up to 3 per cent, unless given special permission.
However, the cap was lifted from 31 March and means rental costs will be back in the control of landlords, 18 months after the first price freeze was introduced.
Despite the rent controls imposed, average advertised rents in Scotland are up 9 per cent year-on-year.
Meanwhile, London rents are now 4 per cent above last year. This is also the same in Wales.
London had seen rents boom during 2022 and 2023, but now, thanks to improvement in the balance between supply and demand in the capital, prices appear to be cooling in most areas.
Change of pace: London rents are now 4% above last year, now the joint smallest increase of all regions having been the biggest riser in the past two years
Next Government ‘must build homes to cut rents’
Tim Bannister, a property expert at Rightmove thinks the next Government needs to streamline the planning process, accelerate housebuilding, and provide incentives for landlords to invest in more homes.
He said this would improve the supply and demand imbalance in the rental market and ensure that rental prices stop soaring upwards.
‘We’ve been talking about the imbalance between supply and demand in the rental market for a long time now,’ says Bannister. ‘It’s easy to forget that there was a time before the pandemic where rental price growth was more stable.
‘Double-digit yearly rent increases were not sustainable, and, whilst there has been some improvement in the ratio between supply and demand, price growth at 7 per cent suggests we are still out of balance.
‘In fact, our analysis shows we would need 120,000 more properties on the rental market to achieve a more sustainable level of rent growth of around 2 per cent per year.
‘The next Government should be prioritising an improvement to the planning process, an acceleration of housebuilding, and encouraging more supply into the rental market.’
Biggest imbalances between supply and demand
Nathan Emerson, chief executive of Propertymark, the estate agent membership body, agrees with Bannister.
He said: ‘Propertymark has long argued that the private rental sector needs more houses to stabilise rental prices, but there is a myriad of other factors that can contribute towards making the market more attractive for both investors and tenants.
‘With a general election coming 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 lower rents for tenants in the long-term.
‘Whilst we support a greater supply of houses, there has to be a sensible deliverable programme mindful of protecting the green belt wherever possible.
‘It would also be wise for them to avoid rent controls which have had a devastating effect on the private rental sector in Scotland’
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