UK rents rose to a new record this month, reaching a nationwide average of £1,091 against a backdrop of increasing demand, falling supply – and rising costs.
Data from HomeLet found that even outside London, average rents had reached £920, a 1.1% increase on a month earlier. Meanwhile, London rents recovered especially strongly as tenants move back into the capital after the pandemic.
Prospective tenants are driving up prices by competing against each other to snap up the reduced number of properties coming to market. Agents report that more applicants are offering more than the asking rent and paying increasing amounts of rent upfront. A survey by The Deposit Protection Service found that 15% of new tenants who responded had agreed to pay more than the listing asked for. Homelessness charity Step By Step has called for rival bidding to be banned so that poorer tenants are not priced out of the market.
Meanwhile, data from Propertymark suggests that more tenants are choosing to stay beyond the initial term of their tenancy. With rental stock falling, finding a replacement home is increasingly difficult – not to mention expensive.
However, many tenants also report that they have had to move out after being handed unaffordable rent increases.
It isn’t all good news for landlords, though: the rise in rents is being driven by increased costs as well as rising demand. Mortgage providers are passing on the Bank of England’s increased interest rate rises to their landlord clients, with more rate hikes expected in the near future.
Lenders are also tightening up affordability criteria on buy-to-let mortgages, making it more difficult for investors to start or expand a property portfolio. Repairs and renovations are getting more expensive too, while landlords offering increasingly popular all-inclusive tenancies will need to increase rents to offset rising energy prices.
Meanwhile, rental platform Zoopla estimates that tenants are hitting the limit of their affordability. Their latest data shows that the average solo tenant spends 37% of their pre-tax income on rent, albeit with enormous regional differences.
Other housing market headlines
Housing supply improves as the market starts to slow – Property Industry Eye
How are rising rents affecting the cost-of-living crisis? – Economics Observatory
How long can UK house prices defy gravity? – The Guardian