Rent rises to moderate by year end as affordability b...

The surge in rents will subside and the market will normalise before the end of the year.

That’s the prediction from Zoopla in its latest market snapshot.

It says rental growth is currently being driven by high rental demand and limited supply, trends that are more pronounced in city centres.

But the surge of post-pandemic pent-up demand will normalise through summer and autumn, says the portal, while at the same time, stretched affordability will also start to put a limit on further rental growth although this may not apply at a similar level across the market.

While renters with more disposable income can adjust their property choices in order to limit their rental payments, those at the more economic end of the market have less choice to do this, and are most impacted by rent rises.

However, the portal observers that the lack of supply is a wider structural issue in the Private Rented Sector as buy to let landlords are not investing at the same pace as they were before tax changes which have been introduced since 2016. This will put a floor under rental growth.

Even so, in a market which has registered double-digit annual rental growth, landlords in local markets will find increased sensitivity to pricing among renters.

Zoopla says its data shows that, on average, tenants are staying put in their current properties for longer, which may be partly due to not wanting to move into a new rental property where a larger rent increase will be applied.

There is a question around rising interest rates and whether renters will feel the impact of rising mortgage rates for landlords. Most landlords will have fixed-rate mortgage deals, so this will not be happening across the whole market at once, but in these market conditions, local demand will determine whether landlords can pass on this increased cost, especially as living costs are rising.

“We expect rents to continue to rise this year, but at a more modest pace, with UK rental growth excluding London at 4.5 per cent by the end of the year, which is in line with independent forecasts for earnings growth for 2022. We forecast London rental growth to be running at around 3.5 per cent by the end of the year” the portal concludes.

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