Demand for cheaper flats is surging as the average rent in the UK has increased by £115 per month since last year, to stand at £1,051.
Rent is now so high that it swallows up just over a third (34.4%) of the average income of a single earner, according to figures from property website Zoopla.
This surge in rents is heavily impacted by a severe supply and demand imbalance with the stock of homes available to rent standing at just half of the five-year average.
The average letting agent currently has just eight homes available to rent.
Zoopla said it has seen an increase in demand for smaller properties such as flats, which may be more affordable to run.
“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,” the report said.
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.”
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, Zoopla added.
New-build city-centre flats in particular are becoming increasingly appealing, figures showed. 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 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%.