Rental growth across Great Britain in March hit 10.8%, posting its third ever double-digit increase since the Hamptons Lettings Index began just over a decade ago.
In March, the average rent for a newly let home reached £1,236 per month, around £121 per month higher than the same month last year. March saw the second fastest increase posted in any month after the 11.5% increase in May 2022. The other time rental growth hit the 10% mark was in February 2023.
Rental growth continues to be highest in the capital, with average London rents rising 16.2%. Inner London saw rents rise 18.5% over the last year to reach £3,046, with rents surpassing the £3,000 mark for just the second month running. The 15.6% growth posted in Outer London marks the fastest annual increase on record and takes average rents here to £2,013 per month.
“While house price growth continues to slow, rents keep moving in the opposite direction, tenants find themselves with a little more choice than they did last year, which has been reflected in a 10% increase in the number of tenants moving home. However, the number of rental homes on the market seem to have found a new normal at nearly two-thirds below pre-pandemic levels,” Beveridge said.
Rents rising again after New Year stutter
The latest HomeLet rental index shows that UK average rental prices are continuing to rise after a previous drop in prices at the beginning of the year. The headlines from this month’s report are that the average rent in the UK is now £1,184 per calendar month, increasing 0.8% from last month’s average of £1,175 pcm.
When London is excluded, the average rent in the UK is £993 pcm, up 1% from the previous month. The North East saw the largest monthly variance, experiencing a 1.6% increase from last month, with average rents rising to £639 pcm. London rental prices slowly start to rise again after experiencing a drop in previous months, with average rental prices hitting £1,979 pcm, some 0.2% above the previous month.
Commenting on the latest data, Andy Halstead - HomeLet & Let Alliance chief executive - says, “with every region of the country reporting a month-on-month rental price rise, it’s fair to say that demand for rental properties remains exceptionally high. It had been interesting to observe a few months of decreased prices in London, but the capital appears to have recovered from a slight dip, in line with rises across the country. Given the insufficient housing stock and continued rising rents, rent guarantee becomes ever more essential for landlords and letting agents. As a group with rent guarantees protecting £1.5 billion in annual rents, we are acutely aware of how important it is for landlords to be protected should their tenants be unable to pay their rent. The lack of available properties means that the market is likely to continue to be very competitive, so landlords must remain vigilant, and tenants should be aware that finding a suitable property is proving to be a tricky task for many.”
Rents skyrocket across UK amid warning of “housing disaster”
Average room rents rose by 10% or more in every UK region, every London region and almost every major town and city, compared to the start of 2022. Data from flatshare site SpareRoom shows that average monthly room rents in the capital have now soared to £952, up 20% year-on-year.
For the first time ever there’s not a single London postcode with average monthly rents under £700. Even traditionally cheaper areas like Abbey Wood (SE2) are becoming more expensive, due in part to their relative affordability, but also as a result of better transport links, thanks to the Elizabeth Line.
The number of London postcodes where the average room rent tops £1,000 a month more than quadrupled in the past year. There are now more than 30 postcode regions where the average is £1,000 or more, and Chelsea passed the £1,500 mark for the first time. Taking a wider look across the country, UK room rents rose by 15% in the first quarter of 2023, compared to Q1 2022. North East and North West regions saw the biggest rent increases after London, both up 16% when comparing Q1 2023 with Q1 2022.
SpareRoom director Matt Hutchison says, “although demand for rooms has fallen since the record highs at the end of 2022, it’s still above pre-pandemic levels. Combined with higher interest rates and an increased cost of living, that’s continuing to push rents up. Demand is likely to fall a little over the course of the year, but unless something is done to stop the continuing decline in rental supply, things aren’t likely to improve much for renters. Government has to do much, much more to help, or the housing crisis will become a housing disaster.”
Rents to rise by 4% in next 12 months
Rents are set to increase by a further 4% in the next 12 months, a report by RICS has predicted. This is due to the high level of interest on mortgages, making it virtually impossible for first-time buyers to get on the housing ladder, resulting in more turning to the rental market.
This also comes at a time when the market is witnessing an exodus of landlords, resulting in a lack of stock which is pushing up the prices. David Hannah, group chairman at Cornerstone Tax, said, “rent prices are going up because landlords’ costs, particularly as a result of rising interest rates, are increasing. However, this is not the whole picture as there is still a chronic undersupply of housing in the UK in popular locations. For example, rent rises in London post pandemic have been as much driven by a lack of available properties as they have been by inflationary pressure. The situation has been particularly exacerbated for houses in multiple occupation (HMO) – these are landlords who typically include the costs of energy, heating, and other bills into the rent. The soaring increase in energy costs has as a result had to be factored into the rent for these types of properties. Accordingly, rent rises in these types of lets exceed inflation by a considerable margin.”
As well as soaring mortgage prices landlords are now faced with the government’s costly new EPC targets, which will force landlords to upgrade the energy efficiency of their buy-to-let properties to a rating of ‘C’ in 5 years, which is set to come at a considerable cost or face fines of up to £30,000.
The long-debated Renters Reform Bill is also still being considered by the government, which contains radical plans for the housing industry. Hannah added, “in terms of the rental reforms being considered, I am in favour of rogue landlords being driven out of the markets, but there are also good landlords who have bad tenants that need to be considered. The most important thing is to balance tenant rights against tenant obligations and ensure that landlords keep some of their authority. “There are cases in which properties have been damaged and tenants refuse to let their landlord inspect the home, or where rent has not been paid for a considerable period of time, for example. I welcome the proposed changes of the renting rules, and agree tenants need protection, but landlords ultimately need rights too. Our study shows that landlords do need help alongside tenants as nearly 1 in 4 say their biggest mental health strain is managing their tenants.”
Quarter of tenants struggling to pay rent
A survey of 2,000 tenants in England and Wales shows that some 23% claim to be struggling to pay their rent. The Deposit Protection Service, which conducted the survey, says 51% of respondents said they are worried about not managing their payments in the future, with 33% reporting rent increases during the past 12 months and 27% suggesting they are paying a quarter more each month than the previous year.
Amongst tenants moving to a new property, 62% said they are paying a higher rent than they expected and 64% said they have made financial sacrifices to meet new rental payments. The DPS also says that 30% of respondents who had moved property during the last 12 months said they have had to take on extra work or additional jobs to meet rent payments, with 45% of non-movers also saying they have experienced rent increases during the past year.
Managing director Matt Trevett says, “these results suggest that rent rises are taking place across the country and are clearly affecting moving and non-moving tenants alike. As a result some tenants are making significant lifestyle and financial adjustments to continue renting or secure their next property. A significant proportion are telling us that they are reaching the limits of what they can afford as a result of the combination of higher-than expected rents, food and energy costs and are expressing concerns about the future should their rent rise further.”
Almost half (49.91%) of moving tenants said they were paying between £51 to £200 more a month than expected, with 18.6% paying an additional £201-£300, while 6.98% were paying £301 to £400 more. Some 7.33% said they paid over £501 a month more, with just 3.04% incurring a rent rise of £50 a month or less. 41% of movers said they had found it difficult to secure a new rental; the main causes included affordability, a shortage of suitable properties and general high demand.