New Labour government urged to incentivise landlords to invest in more homes for tenants
The latest snapshot of the rental market from Rightmove, reveals that average advertised rents for tenants outside London have risen to a new record of £1,316 per calendar month. This milestone signifies that the average rent advertised outside London is now 7% higher than last year.
Although rental growth has moderated from its peak of 12% two years ago, it remains significantly above the pre-pandemic norm of around 2% per year. The analysis highlights the pressing need for approximately 120,000 additional rental properties to enter the market to achieve this more sustainable level of 2% rent growth annually. The current imbalance between supply and demand is a key driver behind the rapid increase in advertised rents since the pandemic, with far too few homes available to meet tenant demand.
RENTAL MARKET: REGIONAL DISPARITIES EVIDENT
Scotland is experiencing the most severe supply and demand imbalances, while London appears to be the least affected. An improved balance between supply and demand in London has contributed to a deceleration in rental price growth. During 2022 and 2023, London experienced some of the largest annual rent increases, driven by a significant widening gap between supply and demand during the pandemic.
A notable 15% decrease in the number of tenants looking to move in London, coupled with a 16% increase in available rental properties, has resulted in the capital seeing the most significant overall improvement in supply and demand compared to last year. Consequently, rental price growth in London has decelerated from its peak of +18% in 2022 to +4%, marking the joint smallest yearly rise across all areas in Great Britain.
CALLS FOR GOVERNMENT INTERVENTION INCREASE
Commentators are urging the new Labour government to streamline the planning process, expedite housebuilding, and incentivise landlords to invest in more homes for tenants. These measures are essential to addressing the supply and demand imbalance in the rental market and ensuring sustainable rent growth.
The new government must prioritise planning reforms, accelerate housebuilding, and encourage more supply into the rental market. These steps are necessary to create a more balanced and sustainable rental market and avoid the unsustainable double-digit yearly rent increases witnessed in recent years.
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