Rents in the UK have just hit the highest rate on record. This, coupled with sky-high energy bills and soaring food prices, means families across the country are struggling, with many wondering whether things may start to ‘calm down’ anytime soon.
According to Rightmove, the average monthly rent being asked of new tenants across Britain, excluding London, has hit a record £1,172 per month. In London, the typical private rent being asked for is an eye-watering £2,480 - while prices in the inner part of the capital have surpassed £3,000 for the first time ever.
But it isn’t just rental prices which are causing such chaos. Over the past several months, lettings agencies have also seen huge demand for properties, which the supply simply hasn’t matched up to. Stories of people queueing outside flat viewings and places being snapped up in minutes began to emerge, adding to the sense of panic.
So what exactly caused the madness we are seeing in the rental sector - and how long will it last? NationalWorld spoke to an expert to find out.
Why are rental prices so high?
Katinka Hill, a lettings expert and London regional director at estate agency Chestertons, told NationalWorld that rents went up by 15% to 20% in 2022. The main reason for this was, simply, a huge spike in demand.
“There were more prospective tenants than there were properties,” Ms Hill explained. “So what happens is people start over-bidding - offering huge amounts over the asking price. This in turn causes a frenzy where prices shoot up.”
What made demand soar?
Demand for rental properties - particularly in cities such as London - soared after the country began to emerge from the coronavirus lockdown. “No one had really moved house for two years,” Ms Hill explained, “so when the country started running again there was this huge bounce back. People, particularly young people, were moving out of family homes, and other adults were re-locating for jobs.”
There was also a huge spike within corporate lettings, as companies started trying to get their employees back in the office, she added.
Something else that had a “pretty significant” impact on demand, according to Ms Hill, was the cost of living crisis. “People who were perhaps initially looking to buy a property found that they had to move back to renting, as finances had become a lot tighter.”
Liz Truss and Kwasi Kwarteng’s mini budget, which sparked turmoil in the financial markets and drove up mortgage rates, also pushed more people towards renting. “People wanted to rent instead of buy while things were chaotic, so there was an increase in demand here as well,” Ms Hill said.
Are things changing?
According to Ms Hill, things are starting to calm down again - albeit slowly. She told NationalWorld that in December 2022, there were 15% more rental properties available than compared to the same period in 2021. Meanwhile, 12% fewer tenants were looking to move in December - one of the only months in the year where this happened.
Something that contributed to this increase in the number of properties on the market was a rise in ‘accidental landlords’, Ms Hill said. These are property owners who want to sell, but either can’t or have chosen not to at present - meaning they end up renting their properties out instead.
“Again, a lot of these were sparked by the mini budget and mortgage rates,” Ms Hill said, “with owners opting for renting while they ride out the wave.”
With the rental landscape in its current state, Chestertons predicts that rents will increase by 3% - 5% this year. While this is still an increase, it’s a significant drop from 2022, where rents shot up by 15% - 20%.
However, it’s worthing noting that the rental market is in its low season at the moment - so the current state may not be entirely representative, Ms Hill added. The high season runs in the summer, specifically between July and September, so things could still make a return to the chaos of 2022.
Contemplating the current market, Rightmove’s director of property science Tim Bannister said: “Although the fierce competition among tenants to find a home is starting to ease, it is still double the level it was back in 2019. Letting agents are seeing extremely high volumes of tenant inquiries and dealing with tens of potential tenants for each available property.
“Landlords will need to balance any rent rises with what tenants can afford to pay in their local area, to continue to find tenants quickly and avoid any periods where their home is empty due to tenants not being able to meet the asking rent. There appears to be some more property choice for renters compared to the record low levels of last year which would slightly ease the fierce competition to secure a home.”
Rightmove, like Chestertons, also forecasts that rents will rise by about 5%. This is lower than in 2022, but still above the average of 2% that was seen during the five years before the pandemic.
James Redington, sales and lettings director at Douglas & Gordon, disagreed with his peers however. He told PA Media: “We’ve seen the highest rent increases we’ve seen for decades, and we don’t expect this to slow down in the short-term.”