The cost of renting a property from a private landlord is rising at the fastest rate since records began in 2006, the Office for National Statistics has said.
In a sign that the UK’s 4.6m private tenant households are failing to benefit from the fall in overall inflation and lower house prices, the ONS said rents increased by 6.2% in the year to November – up from 6.1% in October.
A breakdown of the data showed renters in Wales had seen the sharpest increase (7.3%), followed by Scotland (6.2%) and then England (6.1%).
Within England, London recorded the sharpest annual jump in rents, registering a rise of 6.9% in the year to November. The north-east recorded the lowest increase: 4.7%. Figures for Northern Ireland are only available up until September 2023 but showed an annual increase of 9.1%.
Separate ONS data released on Wednesday showed overall inflation as measured by the consumer prices index falling from 4.6% to 3.9% in November, while house prices dropped by 1.2% in the year to October.
Aimee North, the ONS head of housing market indices, said: “While housing prices are generally falling, the surge in rental prices continues with another record-breaking increase in the year to November.”
Barret Kupelian, chief economist at PwC UK, said some of the increase in rents was being fuelled by higher earnings in the labour market, leading to higher demand at a time when supply was dropping.
He said: “For 2024, we expect rental growth to moderate as the labour market and earnings, in particular, start to cool. However, we still think that rental growth will remain above historic rates for most of next year.”
The Bank of England said the 14 increases in interest rates since December 2021 could be pushing up rents. In a post on Threadneedle Street’s blog – Bank Underground – Daniel Albuquerque and Jamie Lenney said: “This post suggests that interest rate rises decrease rental prices in the long run, but that they may initially put pressure on the rental market.
“In our analysis, a temporary rise in interest rates leads to temporary increases in rental yields, as happens for returns on other assets in the economy. Tenant demand rises at first and landlord supply may be dampened by rising mortgage costs and slow adjustment of house prices. However, over time, our results indicate that the housing market should adjust, causing rental prices to decline.”
