UK rental growth reaches three-year high

A supply shortage is responsible for UK rental growth hitting a three-year high, new data has shown.

According to latest figures from Zoopla, a 2.6 per cent annual increase was recorded in the final quarter of 2019.

The property portal also recorded a 4 per cent contraction in the supply of homes available to rent over the last two years, while the demand for rented homes rose by 8 per cent during 2019.

The annual growth in average earnings was marginally higher than the increase in rental prices however - up by 3.8 per cent according to the ONS.

Over the last decade average rents have grown from £700 pcm to £886 pcm, an increase of 27 per cent, compared to a 26 per cent growth in average earnings.

Richard Donnell, research and insight director at Zoopla, said new investment by landlords has fallen since the introduction of tax changes in 2016, and "this has been felt most keenly in southern England where property values are highest and yields lowest".

He added: "This is creating scarcity and explains why rents are rising in the face of increased rental demand as levels of employment continue to grow."

Richard predicts that rents will increase by 3.5 per cent over 2020 as a lack of supply supports faster growth.

He added: "With further policy changes expected from the government to provide more security of tenure for renters we expect the supply of rented homes to remain constrained, which will support rental growth over 2020.

"With robust earnings growth, the impact on rental affordability will be muted."