Glasgow is the third strongest-performing urban rental market, according to new data.
Property search site Zoopla stated that compared to the UK average of 12.3% annual rental price growth, London (17.8%) was top, followed by Manchester (15.5%), Glasgow (14.4%) and Bristol (12.9%).
Surging rental prices have been driven by a supply and demand imbalance, with the stock of homes available to rent standing at just half of the five-year average, according to the research.
The supply shortage is also being impacted by an increase in renters staying put in their current properties in the hope of avoiding rent hikes and landlords continuing to sell properties in the face of tax and regulatory changes.
Renters are favouring smaller properties such as flats, which may be more affordable to run, as living costs rise, according to Zoopla, which has seen an increase in demand for smaller flats as people feel the cost-of-living squeeze, with fewer renters looking for two and three-bedroom houses.
The average rent has increased by £115 per month since last year, reaching £1,051 per calendar month – swallowing up just over a third (34.4%) of the average income of a single earner.
Smaller properties may be cheaper to rent, as well as less expensive to run in terms of energy costs.
New-build city centre flats in particular are becoming increasingly appealing, Zoopla stated. As well as potentially having energy efficiency advantages, they may also be located closer to where some renters work, helping them to save on transport costs.
Richard Donnell, executive director at Zoopla, said: “Rents have surged ahead over the last year but there are signs that the pace of growth is peaking and set to slow into 2023.
“Renters are responding and looking for smaller, better value-for-money homes to rent with an eye on energy costs as much as rental levels.”
Last week, First Minister Nicola Sturgeon outlined plans for a rent freeze in Scotland as part of a range of measures to tackle the cost-of-living crisis.
Donnell said: “There is a risk that more regulation to improve standards or potential new measures to dampen rental growth, as proposed in Scotland, may compound the supply problem which is pushing rents up in the first place.
“Policymakers need to tread a careful path between protecting consumers and ensuring a decent supply of homes for rent.”
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