Zoopla: London drives rental growth to 12.3%

Annual rental growth is on the verge of peaking at 12.3% – driven by an increase of 17.8% in London, according to Zoopla’s UK Rental Market Report.

Zoopla said this level of growth is unsustainable and reflects a rebound in rents after a double-digit decline over the pandemic.

Indeed, typical rents in London are currently 7.8% higher than before the pandemic, compared to the UK-wide average of nearly 13%.

Katinka Hill, regional lettings director at Chestertons, says: “London has long established itself as a hotspot for professionals which has always driven rental demand for one and two-bedroom flats or pieds-à-terre.

“As tenants are now facing added pressure from the cost of living crisis, we are witnessing an increase in enquiries for smaller apartments which is creating an even more competitive market for renters.”

The slowest region for rental growth is the North East, where they’ve risen by 7.6%.

Rental growth in urban areas across England (10.5%) is outpacing rural markets (8.5%), as strong employment growth drives demand in cities.

Higher levels of new-build supply concentrated around city centres is also becoming more appealing to renters looking for smaller homes with lower running costs.

How much higher can rents go? According to Zoopla rents have further “headroom” for above-average growth in the less expensive areas of the UK.

The report said the headroom can vary drastically, given the private rental market caters to a wide range of households on low and high incomes.

The typical pattern of rental affordability varies by location and income level. The latest English Housing Survey asked renters how easy or difficult they find rental cost, while three quarters of private renters said they found rental payments very or fairly easy while 25% found them fairly or very difficult to pay.

Private renters living in the Midlands and northern regions found rental costs easier to pay than those in the South. In addition, a higher proportion of renters on lower and middle incomes were finding rents difficult to pay in 2021.

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