Rents now more than 33% of average monthly salary

UK monthly rent now accounts for 33% of the average salary as monthly rents, excluding London, rise 4% annually to £689.

Demand / Supply Analysis

Demand for rental properties across the UK has increased 15% annually in June and by 5% on the month. In contrast, supply has decreased by 17% annually and has dipped 5% on the month. This has led to six prospective tenants registering for every rental property coming onto the market. As Graphs 1 shows, the ratio of new applicants/supply of homes has grown significantly since January 2014 when this ratio stood at 3.8/1.

Contrary to the national picture, supply in the capital has increased by 5% annually and by 3% since May 2014. While supply has increased, demand has increased at a greater rate, rising 43% on the year and 11% on the month. This has caused the ratio to increase to 6.5/1, having plateaued at 6.1/1 for the past two months.

Mortgage Availability

Applications for buy-to-let mortgages have seen a 14% annual increase in June and a 12% increase since May – the highest level since the beginning of 2014. This recalibration is expected as buy-to-let mortgages are not subject to MMR rules, nor are buy-to-let mortgages generally high loan to value. The recent changes to pension annuities are also bringing a wave of fresh investment into the sector from retirees looking to diversify their pension pots.

Tenant Viewing Activity Relative to Agreed Tenancies

Nationally, excluding London, the number of viewings is up 6% annually and 2% since May – the highest number of viewings in one month since November 2011. New agreed tenancies are flat on the month but up 17% annually, just off their September 2013 peak. The flat monthly growth means that the ratio of viewings to new tenancies has marginally increased to 7.0/1 from May, but annually it has dropped from 7.7/1. This suggests that competition in the market is hitting up and when tenants view their ideal property they are moving more quickly to secure it.

London viewings have increased by 25% annually and by 2% on the month in June. New agreed tenancies are up 28% annually but are flat on the month. This has resulted in a slight increase in the ratio from 12.7/1 in May to 12.9/1 in June.

New Agreed Tenancies

Since the beginning of 2014 the volume of people renting has grown. Nationally, new tenancies have increased 17% annually, but are flat on the month. In London new agreed tenancies have risen 28% annually but are also flat on the month. Across the country it is clear that the rental market is very active this year, which goes to show how a healthy rental market works independently of the sales market.