Rents are rising at ‘the fastest rate on record’

Rents are rising at the fastest rate on record – and there is no sign of the surge stopping in 2022.

Average asking rents have hit an annual growth of 9.9 per cent in the last year and reached £1,068 a month outside of London, according to the property site Rightmove’s Quarterly Rental Trends Tracker.

The highest jump on record has been driven by high demand and a low number of rental properties available following Covid-19’s disruption to the housing market.

With no sign of the discrepancy between supply and demand slowing in 2022, Rightmove experts estimate asking rents will continue to rise a further five per cent in the next 12 months.

“Tenant demand continues to be really high entering the new year, meaning the imbalance between supply and demand is set to continue until more choice comes onto the market for tenants,” said Rightmove’s director of property data Tim Bannister. “Landlords understand the importance of having a good, long-term tenant, and there is a limit to what renters can afford to pay, which will prevent rents rising at the same rate we’ve seen over the past year.”

The largest increase in asking rents were found in Wales and the north-west of England, where prices surged more than 12 per cent, as well as in the south-west of England where rents rose 11 per cent.

Pontypool in Monmouthshire, Wales, saw the largest local rise in asking rent of any local area, skyrocketing 20 per cent in just a year from £562 pcm to £674 pcm, followed by Ascot and Littlehampton. 

In London, asking rents are now three per cent higher than before the pandemic started, marking the first time prices in the capital have risen beyond pre-pandemic levels, with an average price of £2,142 per calendar month.

Tenants’ habits changed in the pandemic and that has been affecting demand in London, according to Bannister.

“2020 was defined by the race for space outside of cities, as tenant priorities changed and many moved further out looking for a larger property with green space, or temporarily moved back in with family,” he added. “London was perhaps the biggest example of this, where landlords significantly decreased asking rents by the end of the year to encourage tenants to stay in the capital.

“A year on, asking rents have finally risen beyond pre-pandemic levels, a sign that the capital has not lost its pull and popularity with renters as landlords look to renegotiate previous cut-price terms.”

Richard Davies, head of lettings at London estate agents Chestertons, agreed that the return to offices is starting to see demand in London rising again.

“As 2021 unfolded, the market registered a gradual return of corporate tenants, international students and professionals who considered a partial return to the office and therefore required a property closer to central London,” said Davies. “We have seen this demand continue throughout the usually quieter month of December and predict activity levels to remain very high for at least the first quarter of 2022.”

Meanwhile, it’s a similar story for home owners, according to Zoopla.

The search for space has been a defining trait during the pandemic as the average house price has risen from £216,500 at the start of 2020 to £242,000 two years later.

But Zoopla said demand for new homes was 50 per cent higher in January 2022 compared to the same period between 2018 and 2021.

The property site’s House Price Index found demand for three-bedroom homes outside London is four times higher than average.

There is also surging demand for flats, which has reached its highest level for five years. A return to offices is one of the reasons behind the rise, according to Grainne Gilmore, head of research at Zoopla.

“The effects of the pandemic on the housing market cannot be underestimated,” said Gilmore.

“Even after nearly two years, the pandemic-led ‘search for space’ is one of the factors creating record demand for homes this month. The market is also being boosted by office-based workers re-thinking where and how they are living amid more hybrid working models. But in some cases, as offices re-open, some demand is flowing back into city centres.”