UK rent soars by average £3,240 since Covid, says Zoopla

Published On Dec 10, 2024, 7:00 PM

The average annual rent for newly-let properties in the UK has increased by £3,240 since the end of the COVID-19 pandemic, reflecting a 27% rise over the past three years versus a 19% increase in earnings. Although rental prices are still rising, the pace has slowed to the lowest increase in three years due to affordability issues for potential tenants. There are indications that the rental market is cooling, yet specific areas still experience sharp rent increases, especially in lower-income segments. Moreover, 31% of landlords intend to sell their rental properties in the next two years, which could significantly affect rental supply and pricing. Zoopla anticipates a 4% average rent increase next year as demand remains high.

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Stock Forecasts

VNQView VNQ chart on TradingView

Positive

Given the current trend of rising rents coupled with a potential reduction in rental properties as landlords sell, this situation creates opportunities for real estate investment trusts (REITs) that focus on rental properties. Such REITs could benefit from higher rental income. Conversely, with the stagnation in wage growth compared to rent increases, there could be negative implications for affordable housing sectors and residential real estate companies relying on tenant bases with lower income levels.

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Negative

However, companies heavily involved in affordable housing development may face headwinds if affordability continues to be stretched, potentially leading to lower demand for new affordable units, adversely affecting their long-term viability and share prices.

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