Cost of living crisis: UK rents rise to 13-year high
UK rent prices have hit a 13-year high putting a squeeze on disposable household income as cost of living rises.
Figures from Zoopla show rents have gone up above pandemic levels, rising 8.3% in a year to £969 per month. This is £62 more per month than at the start of the pandemic.
This means that households who agree new lets will pay an additional average annual cost of £744, compared to the start of the pandemic (March 2020).
The average rent now accounts for 37% of gross income for a single earner. While this is broadly in line with the 10-year average of 36%, it is up from a dip of 34% during most of 2021.
Overall, average rents are up nearly 12% over the last five years due to a decline seen in some areas of the country during the pandemic, the real estate firm said.
Data shows demand for rental homes increased 76% in January compared to the New Year markets between 2018 and 2021, Zoopla data shows.
Despite this rise, the supply of rental properties recorded in January 2022 is 39% below levels typically observed at the start of the year. This is "creating competition in the market", with the imbalance of supply and demand ultimately spurring rental growth.
The report attributed the shrinking stock of homes for rent to a continued decrease in buy-to-let investment over the last five years.
As a result, Zoopla says as prices go up, more renters will be choosing to stay in their properties, limiting stock turnover. With supply squeezed, continued demand "will underpin more modest rental growth" in the coming months, especially in city centres.
However, as the spike in demand drops — hampered by the increases in household costs — it will reduce pressure on supply. This will ultimately "drive more local competition" to attract renters in local markets.
“Rent hikes are fanning the flames of the cost-of-living crisis. Tenants have already been badly burned by rising prices, so higher rental costs risk sending their finely balanced budgets up in smoke," said Sarah Coles, personal finance analyst at Hargreaves Lansdown.
Read more: UK house prices hit new high for January as market faces cooldown
Rental prices grew 11% in inner city London compared to the same time last year. "The decline in rents during the pandemic means this has translated into an increase of just £18 per month in rent compared to March 2020," Zoopla says.
Separately, Hargreaves Lansdown's Savings and Resilience Barometer, produced with Oxford Economics, found that renters are far less likely to have been able to build up enough savings, and are less likely to have wiggle room in their budgets.
"Any renters under the age of 32, won’t have known a time when rents were higher*. It’s the last thing they need when prices are soaring on every side," Coles said. "They’re already having to wrestle with the horrible prospect of a 54% hike in energy prices, a spike in taxes, and increases in the cost of everything from petrol to food."
She added: "Prices have been pushed up by a toxic combination of booming demand and dwindling supply. Rental demand has been climbing for well over a year and a half, partly because the number of renters is growing, and partly as a result of lockdowns persuading more people in shared accommodation to look for a place of their own. The survey found demand up three quarters from the previous three Januarys.
"Supply has also been dropping for the past 18 months. Landlords have been squeezed by tax changes, so many are considering selling up while prices are high.
"Meanwhile, others are switching into the more lucrative short-let market. And because renters are choosing to stay put to avoid the worst of the rent hikes, there’s less churn than usual too. It means supply is below the five-year average for the time of year."
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