Where rents are rising faster than inflation

houses rent landlords
houses rent landlords

Rents are outstripping inflation in more than a quarter of British local authorities, as agents warn tenants soon will not be able to pay what landlords are asking for.

Prices have rocketed by at least 10.1pc in 102 council areas as tenants face a crippling lack of supply, according to property website Zoopla.

In three London boroughs, rents have soared at more than double the rate of the Consumer Prices Index. The City of London recorded the largest jump in rents, with prices surging by 24.8pc in the last year. In Kensington & Chelsea, Westminster and Tower Hamlets, rents of newly let properties climbed by 22.1pc, 21.4pc and 20pc respectively.

Tenants are most under pressure in the capital. All of the top 10 areas that recorded the largest jumps in rents in the 12 months to August were in London. In Islington, Hammersmith & Fulham, Camden and Newham, rent growth was in excess of 18pc.

Tenant demand is red-hot in these areas. Richard Davies, of Chestertons estate agents, said: “People are providing CVs for themselves and their pets. On average properties are letting for 10pc to 15pc over their asking prices.”

Sharn Reynolds, of Marsh & Parsons estate agents in west London, noted a one-bedroom flat with no outdoor space that was launched at £450 per week. “We already have offers on it at £510 per week,” she said. This will cost the tenant an extra £3,120 over the course of the year.

“The volume of tenants is pretty bonkers,” Ms Reynolds added. “Since September, we have had 1,700 tenants coming through the door just in our Brook Green office.” By contrast, supply levels have fallen through the floor. “In October so far in that office we have let 10 properties and we have six left available on the market.” This is less than half of typical pre-pandemic levels.

Mr Davies said demand has only continued to rise since lockdown restrictions lifted last summer. “We are seeing more corporate relocators coming back, more students coming in, particularly more international students, and more people migrating to London. At the same time, a lot of the tenants here aren’t moving because they know their rents will rise if they move elsewhere,” he said.

Less churn means less supply. Another problem is that landlords are quitting buy-to-let, further cutting the number of properties available. “A lot of the tenant moves are because their landlords have told them they are selling the property,” Ms Reynolds said.

But there is an affordability cap on how much tenants can pay, particularly in the context of the cost-of-living crisis, meaning landlords could soon hit a wall, Mr Davies said. “It is worrying, and landlords could potentially start seeing arrears.”

Lettings agents stress test prospective tenants, which typically requires them to have an annual salary that is 30 times their monthly rent. A person renting a property for £1,000 per month would therefore require a minimum salary of £30,000.
There are also signs that the faltering sales market is starting to boost rental supply.

The number of lets coming to market across Chestertons’ offices in October was up by 19pc compared to the same month last year, Mr Davies said. “It’s landlords who can’t sell unless they reduce their prices.”

Soaring mortgage rates, which are crippling the sales market, will push more homeowners to become accidental landlords, Ms Reynolds said.

“After the 2016 Brexit referendum, we saw a sudden, huge influx of people saying it is not the right time to sell and they let out their properties instead and it drove prices down. I expect soon we will see more properties that people can’t sell,” she said.

Outside London, the steepest rent growth was in Salford, in Greater Manchester, where prices jumped by 16.3pc. In neighbouring Manchester, rents also climbed by 15.7pc.

Another hotspots was Wales, with rents in Denbighshire and the Vale of Glamorgan rising by 16.2pc and 15.4pc respectively.