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Rent rising at fastest rate in three years

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Annual rental growth reached 2.6 per cent in the final quarter of last year, the highest rate seen in the last three years, the latest rental report from property portal Zoopla has revealed.

This is up from the 1.4 per cent recorded across 2018, and takes the average rent in the UK to £886 per calendar month.

The study noted that rental growth still remains below the rise in average earnings, which hit 3.4 per cent in November, according to the Office for National Statistics.

While on the face of it this will have improved rental affordability, Zoopla found that the typical tenant is still spending 31.9 per cent of their annual earnings on rent, unchanged from 2018.

On a regional basis, three cities saw rents rise at above five per cent last year: York, Bristol and Nottingham. Zoopla noted that they all have below average levels of homes for rent compared to the national average, with the rental market in Bristol and York also impacted by the relatively high cost of purchasing a home.

Downward pressure

At the other end of the scale, Zoopla found three cities which saw rents fall over the year: Aberdeen, Middlesbrough and Coventry. 

Aberdeen saw the biggest drop at 2.9 per cent, its worst reading for more than four years. Properties in Aberdeen took an average of 27.5 days to be rented, the slowest of the 40 cities analysed.

In Coventry, Zoopla noted that the level of supply per agent is 20 per cent above the national average, which is one factor in rents in the city dropping by 0.1 per cent.

Looking at the capital, rents grew by 2.8 per cent in 2019, the highest rate in almost four years.

The report found that the supply of homes to rent per estate agency branch has dropped by 20 per cent over the last two years, which Zoopla put down to the combination of lower new investment from landlords and tenants staying in their existing properties for longer.

Richard Donnell, research and insight director at Zoopla, noted that the scope for landlords to hike rents is greater when wages are rising faster than rents, as has been the case for the last three years. 

But he cautioned that the acceleration in rental growth will moderate in the first half of this year, with rents likely to increase by 3.5 per cent over the year.

He continued: “With further policy changes expected from the government to provide more security of tenure for renters we expect the supply of rented homes to remain constrained, which will support rental growth over 2020. With robust earnings growth, the impact on rental affordability will be muted.”

The results echoed those from Homelet which found a rise of 3.5 per cent in December on the same month last year, with some areas approaching 10 per cent increases.

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