Rent Rises UK
Staff Writer, Halal Incorp
The average rental prices in the UK have surged by over 25% since the onset of the Covid pandemic, with the scarcity of available properties exacerbated by soaring interest rates, according to findings from Savills. The analysis suggests that the typical private rent will conclude this year with a 9.5% increase from December 2022, and it is projected to further rise by 6% in 2024 before reaching a point of “affordability ceiling.”
Savills’ research indicates an overall rental growth of nearly 6% in the first eight months of the year, contributing to a cumulative growth of 26% since March 2020.
The substantial increase over the past few years is primarily attributed to a significant demand for quality rental properties surpassing the available supply, further exacerbated by the impact of escalating borrowing costs.
Rent Rises UK
The cumulative effect of 14 consecutive interest rate rises has led to a considerable rise in costs for landlords with buy-to-let mortgages, prompting some to implement substantial rent hikes or opt to sell their properties.
Even mortgage-free landlords have been increasing rents, while higher borrowing costs are compelling prospective homebuyers to remain in the rental sector for extended periods, intensifying demand.
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The acute shortage of available properties has resulted in fierce competition among potential tenants, leading to long queues at viewings, desperate individuals paying above market rates, and some landlords requiring a full year’s rent upfront.
Rent Rises UK
Savills anticipates that the scarcity of properties and challenging conditions for landlords will sustain robust rental growth in the UK in the short term.
Drawing on various data sources, including its own research, figures from Oxford Economics, and rental growth data from Zoopla, Savills predicts a 9.5% increase in average private rent in 2023. Although lower than the 11.2% increase observed in 2022, this projection surpasses any other year on record according to Zoopla.
Rent Rises UK
Emily Williams, a director in Savills’ residential research team, noted that competition for available housing is intense, with tenants bidding higher to secure a tenancy. Despite a partial boost from income growth, Williams emphasized the difficulty in foreseeing an increase in rental supply in the next few years.
Rising rents are placing additional strain on the financial stability of those in the private rented sector. Savills estimates that the average tenant household now allocates 35.3% of its income to rent, up from 33% in 2021-22.
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In London, the situation is even more pronounced, with rent consuming 42.5% of income. The firm reports a 31% increase in average rents in the capital over the last two years, indicating that renters in London have already reached their limit in bidding upwards.
Rent Rises UK
Significant relief in property supply is not expected until 2026 and beyond, when interest rates are anticipated to be lower. While Savills forecasts a 6% rise in average rents next year, it anticipates lower annual increases between 2% and 3.5% during the period from 2025 to 2028.