The rate at which rents are rising is at a 13-year high. As demand for rental properties soars, the average cost of renting a home is now close to £1,000 per month.
Renters are now paying £969 each month across the UK. That’s £62 more per month than at the beginning of the pandemic.
Continue reading to find out why rents are rising so much and how this could affect both tenants and landlords.
The rate at which rents are rising reached a 13-year high of 8.3% in the final three months of 2021. Now, the average annual rent for those agreeing a new let is £744 higher than pre-pandemic levels.
Rents have risen in every region of the UK over the past year, with London seeing the greatest growth of 10.3%, while increases were smallest in Scotland at just 4.8%.
However, rents are only 12% higher than they were five years ago. This is because they fell in some areas during the early stages of the pandemic.
The New Year has seen soaring demand for rental homes, with the number of people looking for a property increasing by 76% compared to the same period between 2018 and 2021.
This increase in demand for rental properties is, in part, down to people returning to city centres. While the pandemic saw more people interested in moving to wider commuter zones as renters embraced the ‘search for space’, people are now returning to the centres of major cities, such as London, Manchester, Birmingham, Leeds and Edinburgh.
With rising demand comes rising prices. So, as more people look to move back into big cities, rental prices will only be set to rise even more.
Unfortunately, the heightened demand for rental homes is not being matched by an increase in supply. In fact, the number of homes available in January was 39% lower than is normal for the start of the year.
This imbalance between supply and demand in the rental market is creating an intensely competitive atmosphere, pushing the cost of renting higher and higher. On average, homes are taking just 14 days to let, compared with three weeks in late 2020.
The shortage of available rental properties is largely a result of a drop in investment in the sector by buy-to-let landlords. While, at the same time, rising consumer costs are inhibiting many renters from buying property, further limiting the turnover of rental homes available.
Currently, the rental market is unbearably fast paced and there is intense competition from other would-be renters.
As a result, tenants must be prepared to move quickly in order to secure a property – particularly if you are looking in the city centre, where demand has bounced back.
The high demand for rental homes, combined with the shortage of availability, means landlords are less likely to experience void periods.
The ongoing shortage of rental accommodation is expected to underpin modest rental growth in the coming months, particularly in city centres. However, affordability constraints are expected to act as a brake on larger rises.
The January peak in rental demand should start to ease in coming months, putting less severe pressure on supply. This will lead to more local market competition, and smaller rental increases.
Going forward, rents are expected to rise by 4.5% across the UK in 2022 (excluding London), and by 3.5% in the capital.