Expect More Rent Rises Following Long-Term Trend

Rents in June 2024 rose by 6.7% year-on-year, according to the latest figures from the Goodlord Rental Index.

The Index, which analyses data from tens of thousands of confirmed tenancies, says the average rent for tenancies confirmed in June was £1,225. This is 6.7% higher than figures recorded at the same time last year - in June 2023, average rents sat at £1,149.

Regionally, the most significant year-on-year rise was recorded in the South West, where prices rose from £1,191 in 2023 to £1,347. This is an increase of 13%. In London, rents broke the £2,000 mark for the first time this year. An average of £2,010 was recorded for properties in the capital during June (up 2% year-on-year).

June traditionally marks the beginning of ‘high season’ for rental prices. Buoyed by demand from students, rents typically peak between June and September. Last year, rents peaked in July at £1,367 per property, on average.

During every year since 2019, the Rental Index has recorded a rise in rental prices between June and July, meaning even higher rental prices should be expected next month.

Between May and June, average rents rose by 4% month-on-month - from £1,183 to £1,225 - with all but one region recording an increase in rents.

The highest monthly rise was recorded in the South West (14%), followed by the North East (4%) and North West (4%)

The smallest monthly rises were recorded in the South East (1%) and Greater London (1%)

The West Midlands saw a very small reduction in average rental prices (-0.42%). Alongside the rise in rents, voids significantly shortened in June. The average void period - the number of days a property remains vacant between tenancies - was 17 days in June. This is down from 21 days in May, a 19% reduction.

June’s 17 day average was, however, slightly longer than the void period recorded this time last year, in June 2023, when voids were 16 days.

William Reeve, chief executive of Goodlord, comments “there is a lot of discussion as to whether the pace of rental price rises is starting to slow. The next three months - which typically bring the annual peak in rents - will settle this debate. Right now, if this year’s current trajectory of consistent 6-7% year-on-year rent rises continues, we’ll see new records broken across England. And whilst a lot of the current signs indicate that this might be on the cards, we would need to see a very sizeable jump in rents over the next four to eight weeks to surpass 2023 averages. However, it’s safe to say that market demand clearly remains very strong and that this continues to push rents up month-on-month.”

Government must build 120,000 homes to keep rent rises ‘normal’

Rightmove says the government elected today must build 120,000 homes to help return rents to what it believes are normal levels, rising around 2% annually. The demand comes as the portal’s latest lettings index shows that average advertised rents for tenants outside of London have reached a new record of £1,316 per calendar month.

In London, average advertised rents are now £2,652 per calendar month.

The new record means that average advertised rents outside of London are now 7% higher than at this time last year. Whilst the pace of rent growth has eased from its peak of 12% two years ago, it is still much higher than the more normal level of around 2% per year seen before the pandemic.

Rightmove’s analysis shows that approximately 120,000 more rental properties are needed onto the market to achieve this more sustainable level of 2% rent growth per year, based on the current level of demand. The imbalance between supply and demand from tenants enquiring about homes is one of the key drivers behind the rapid increase in advertised rents since the pandemic, with nowhere near enough homes to satisfy the number of tenants looking to move.

Scotland is currently the hardest hit by supply and demand imbalances, while London is the least affected.

An improvement in the balance between supply and demand in London has contributed to a slowing of rental price growth. At this time in 2022 and 2023, London saw the joint biggest increases in yearly rents, following a significant widening in the gap between supply and demand during the pandemic.

A decrease of 15% in the number of tenants looking to move in London, and an increase of 16% in the number of available properties to rent in the capital, means that London has seen the biggest overall improvement in supply and demand compared to this time last year.

The result is that rental price growth in London has slowed from its peak of +18% in 2022, to +4%, the joint smallest yearly rise of all areas in Great Britain.

Rightmove is calling on the next government to streamline the planning process, accelerate housebuilding, and provide incentives for landlords to invest in more homes for tenants, to improve the supply and demand imbalance in the rental market and ensure that growth in rental prices is sustainable.

Tim Bannister, Rightmove’s property expert, commented “we’ve been talking about the imbalance between supply and demand in the rental market for a long time now, so 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% suggest 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 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.”

Rent and mortgage spending is surging at fastest rate in years, says Barclays

There was an acceleration in annual spending on rent and mortgages in May, which surged by 6.3%, according to the analysis of a major bank's current accounts.

This growth rate was higher than the previous month's raise of 3.6%, according to research by Barclays. The bank used its current account transactions for this study, specifically identifying direct debits and bank transfers heading towards mortgage lenders and private landlords.

These transactions covered multiple lenders, with Barclays itself being among them. While the figures indicated a rise in housing costs when compared to 2023, the difference on a month-to-month basis seemed negligible, implying consumers may not feel worse off in the short run, especially considering the decrease in the Ofgem energy price cap last April.
The bank also noted indications of consumers drawing some reassurance from slowing inflation rates. Survey results from Opinium Research for Barclays revealed in May showed that 62% of people felt more capable of living within their means due to the economic slowdown, while over half (56%) out of the surveyed 2,000 individuals across the UK expressed increased confidence about their domestic finances.

Regarding these findings, Mark Arnold, who is head of savings and mortgages at Barclays, said "our latest rent and mortgage spending figures show that, despite the encouraging signs of falling inflation, we're not out of the woods yet. With hopes of an imminent base rate cut fading, according to the latest swap rates (which lenders use to price their mortgages), we're likely to see housing costs remain high for a while longer."

Frances McDonald, research director at property company Savills, commented "aspirations of home ownership remain strong, particularly as the cost of renting exceeds average mortgage payments in many locations."

Huge numbers of empty homes discovered as rental supply falls

An insurance firm’s analysis of official figures show there are now no fewer than 760,821 vacant properties in England, Scotland and Wales.

Sitting in first place is Gwynedd in north-west Wales with over 5,286 vacant properties per 100k people, 6,204 overall. The county with only 117,360 people, recently welcomed the news of plans for 30 new affordable homes in Bethel, a small village with a clear demand for affordable housing.

Gwynedd is known for its alluring coastline and natural beauty, acting as a beacon for tourists, this has meant 77% (4,858) of vacant properties are actually second or holiday homes. This overwhelming amount of empty homes has prompted Gwynedd council to contact vacant property owners to inquire about selling. The incredible amount of empty homes has sadly left many Welsh natives unable to own property within their own communities and drives up house prices making the average property price £136,095.

Argyll and Bute, an area steeped in history and magnificent views, sits in second place for the number of vacant properties per 100k people with 4,887. This is more than 10% of the total number of households in the area. Scotland has an incredible number of empty homes, so much so that the Scottish Government has recently increased The Additional Dwelling Supplement (ADS) which amounts to 6% of the property purchase price if you already own one or more residential properties anywhere around the globe, with an average property price of £133,753 this could amount to more than £8000.

In third place is Pembrokeshire, another Welsh county. The incredible haven for nature and a rich history has also suffered from the influx of holiday-home owners, with 74% of empty homes belonging to those with second properties. There are 4,331 empty homes per 100k people in the county, with 5,346 overall.

Rounding up the top 5 is the Isle of Anglesey in Wales with 3,752 empty homes per 100k and Ceredigion also in Wales with 3,595 vacant properties per 100k.

The analysis was carried out by Alan Boswell insurance.