UK-wide rental prices are up 2.0 per cent annually to £876 – a three-year high – according to a new quarterly survey from Zoopla.
The current rate falls just below the 10-year average of 2.3 per cent.
This increase in private rents is failing to keep pace with growth in average weekly earnings. It means the affordability of renting has improved over the last three years, with rents rising at half the rate of average UK earnings growth.
Zoopla’s way of measuring rental affordability is based on rental costs for one to four bedroom homes as a percentage of average earnings for a single person.
The portal says this measure provides a consistent view of affordability over time and the relative level of affordability between locations.
It says renting is least affordable in areas where growth in employment has been faster than growth in housing supply, where house prices are high and a higher income is needed to access home ownership, and where there is a significant student population, which increases demand.
Regional rental affordability is most attractive in the North East (where rent equates to 22 per cent of a single earner’s wages) and least attractive in London (46 per cent).
All regions other than the South West and East Midlands show an improved level of rental affordability today compared to the five-year average.
In London, rents stand at 46 per cent of a single person’s wages, compared to a five-year average of 49 per cent, but when assessed on the basis of 1.5 earners, rent falls to 33.2 per cent of earnings, in line with the UK average.
“Renting is more affordable today than the 10-year average. This follows weak rental growth over the last three years, and an acceleration in the growth of average earnings. First-time buyers, 80 per cent of whom exit the private renting sector to buy, has also moderated rental demand” explains Zoopla insight director Richard Donnell.
“Rental affordability varies widely across the country, reflecting the relative strength of local economies. High house prices increase the underlying demand for rented homes. Meanwhile, in markets where buying is more affordable, rental demand is limited, resulting in lower rental values.
“Whilst 46 per cent of an average single person’s earnings will go on rent in London, the majority do not rent on their own, which improves the affordability profile. Two people renting a two-bed property in London will spend 24 per cent of their earnings on rent, which increases to 28 per cent for two people renting a three-bed home.”
Meanwhile across the UK, homes take 17 days to rent on average.
This is down from one year ago, when homes took 19 days to rent.
Homes take the longest to rent in the North East (22 days), followed by Northern Ireland (20.7 days) and the West Midlands (19.3 days) and Wales (19 days). Homes in the South West are let fastest, averaging 13 days, followed by Scotland (15 days) and the East Midlands (15.7 days).
Richard Donnell comments: “The level of competition for rented property varies significantly across the UK. While homes in Aberdeen take nearly a month to rent [26.2 days], homes in York and Bristol take 10 days, signalling greater competition amongst renters.
“The decrease in average time to rent for the UK is evidence of rising demand at a time when the rental market is seasonally stronger. Rising demand is feeding into faster rental growth, which we expect to moderate over The final quarter of 2019 on a more modest increase in demand.”