Rents have hit record highs but rate of growth is slowing
A growing number of young people are unable to fly the nest because of soaring rental costs, latest figures show.
Data from Hamptons shows that first-time renters accounted for just 4.6% of new tenancies in Great Britain during the first five months of 2023, down from 6.1% in 2015. Soaring rental costs are a key reason why “around 105k missing renters are relying on the hotel of Mum and Dad”, said Aneisha Beveridge, head of research at Hamptons.
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National average asking rents outside London hit a new record of £1,190 per month during the first quarter of 2023, according to Rightmove – up 9.4% annually. And the average in the capital surpassed £2,500 for the first time.
Rental prices vary significantly across the UK, however, with tenants in some regions paying hundreds of pounds less each month than those in more expensive areas.
Why are average rents so high?
Rent price hikes “have been driven by a surge in demand since the pandemic, combined with a shortage of rental homes”, Which? said.
A growing number of landlords are selling up as a result of rising mortgage rates, tax changes and high energy costs.
Other landlords hit by the cost-of-living crisis are passing on these additional costs to tenants, “making it more and more difficult” to afford rent, said The Money Edit.
The number of new landlords has also decreased, with prospective property investors put off by the economic backdrop and shifting regulations.
Where is the cheapest rent?
While rents have reached a record high, said Rightmove, the pace of rent growth “has now eased for three quarters in a row”. In London, the quarterly rate of rental growth slid from 5.8% to 0.9%.
According to the property portal, the cheapest place to rent in the UK in Q1 of 2023 was the northeast of England, at an average of £803 per month. Prices in the region were up 9.7% year-on-year, however.
Tenants in the southwest of England faced the lowest annual rental growth rates, at 7.5%, taking the average to £1,293.
In Scotland, rents reached more than £950 per month between January and March, while the averages in northwest England and Yorkshire and the Humber were £1,025 and £940 per month respectively.
Renters in Wales were hit by an annual increase of 11.9%, with rents reaching £987 per month, while those in the West Midlands saw a 9.2% increase, at £1,052.
Will rents keep going up?
Housing secretary Michael Gove has said that many renters are facing an “unacceptable” choice between sucking up rent rises or losing their home. Some landlords were “profiteering shamelessly from their tenants”, he told the i news site in April, after YouGov polling of 4,148 adults across the UK found that 62% of renters have faced rent hikes during the previous 12 months.
However, Gove stopped short of following Scotland by introducing a rent freeze.
The “good news” for tenants is that rents may be starting to fall after two years of aggressive rises, said This is Money. Data from Hamptons shows that the average rent on a newly let home in the UK rose 9.1% year-on-year in May, down from 11.1% in April.
In London, annual growth dropped to 13.3% from a record 17.2% in April.
But despite the declines, the Royal Institution of Chartered Surveyors is still predicting rental growth of just shy of 6% per year over the course of the next five years, owing to the “continued mismatch between rising demand and falling supply”.
Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously written for FTAdviser, ThisIsMoney, The Mail on Sunday and MoneyWeek. This article is based on information first published on The Week's sister site, The Money Edit.
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