The average cost of renting a home in the UK is approaching £1,000 a month after demand drove prices up 8.3% in the final three months of last year, marking the fastest increase in more than a decade.
Renters around the UK are now paying £62 more each month than before the pandemic, taking the average monthly rent to £969, according to property website Zoopla.
The average annual rent for people who are agreeing a new let is now £744 higher than it was in March 2020 before the pandemic.
The rate of 8.3% in the final three months of 2021, compared with the same period a year earlier, is the steepest rise in 13 years.
The increase will put further pressure on households, who are already feeling the squeeze from rising energy bills and wider price rises.
Rising rents will also make life difficult for people who are trying to get on the property ladder at a time when the price of the average UK home reached a record high of £276,759 in January – £24,500 higher than a year earlier, according to recent figures from Halifax.
Over the past year, rents have risen in every region of the UK, Zoopla found. The strongest growth – 10.3% – was in London, followed by Northern Ireland (10.2%) and Wales ( 9.8%). The increases were the lowest in Scotland, where they reached 4.8%, and north-east England where they rose by 6%.
However, rents in the capital are only £18 a month higher than they were in March 2020, because they fell during the pandemic.
Renters including office workers and students are now returning to the centres of the country’s largest cities including London, Manchester, Birmingham, Leeds and Edinburgh, after the “race for space” during the pandemic led many people look for a move to commuter areas.
Demand for rental homes took off at new year, as the number of people searching for a property was 76% higher than during the same period between 2018 and 2021.
Higher demand has not been matched by an increase in supply, and 39% fewer homes were available on the rental market in January compared with typical levels seen at the start of the year.
The lack of available properties has pushed the cost of renting higher and created intense competition for rental homes, which are taking an average of 14 days to let, compared with three weeks in late 2020.
“Rent hikes are fanning the flames of the cost of living crisis,” said Sarah Coles, a senior personal finance analyst at broker Hargreaves Lansdown. “Tenants have already been badly burned by rising prices, so higher rental costs risk sending their finely balanced budgets up in smoke.”
She said the number of renters was growing, “partly as a result of lockdowns persuading more people in shared accommodation to look for a place of their own.” Meanwhile, landlords have seen tax changes put a squeeze on their income, so have considered selling their properties while prices remain high.
Rent still accounts for 37% of a single earner’s pre-tax income, according to Zoopla, which is higher than the low of 34% seen during the pandemic, but only slightly above the 10-year average level of 36%.
