Renters are favouring smaller properties such as flats, which may be more affordable to run, as living costs rise, according to a property website.
Zoopla said it 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.
Its report said: “We have seen a steady reduction in the proportion of renters looking for two and three-bed houses, and an increase in demand for one and two-bed flats over 2021 and 2022. This trend has been accelerating in recent weeks.”
It said 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.
Renters are ... looking for smaller, better value-for-money homes to rent with an eye on energy costs as much as rental levels— Richard Donnell, Zoopla
New-build city-centre flats in particular are becoming increasingly appealing, Zoopla said. 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.
The website said the the strongest-performing urban rental markets are currently London (17.8%). Manchester (15.5%), Glasgow (14.4%) and Bristol (12.9%), where annual rental price growth is standing above the UK average of 12.3%.
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, Zoopla said.
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, the website added.
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, Scotland’s 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.
Mr 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.”
Hannah Gretton, lettings director at property services provider LSL’s Your Move and Reeds Rains brands, said: “On average, we are seeing double figures of inquiries per property with a one-bedroom property in Manchester last week receiving over 100 requests to view, highlighting just how busy our branches are and the challenges renters face when it comes to finding an appropriate property.”
