UK rents soar at fastest pace on record as tenants face ‘rental cost crisis’

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The cost of renting in the UK is growing at the fastest rate on record as the property market continues to be affected by tight supply and rising interest rates.

The Office for National Statistics (ONS) said average UK rents rose by 9% in the 12 months to February, up from 8.5% in January.

This was the highest annual percentage change since the UK data series began in January 2015. Private rent inflation was highest in London at 10.6% and lowest in the North East at 5.7%.

The average monthly rent in the UK is currently £1,238, up £102 from 12 months ago.

However, in the 12 months to January 2024, average house prices fell by 0.6%. In England, average house prices fell by 1.5% and in Wales by 0.8%, but in Scotland they rose by 4.8%.

The 9% rent increase is well above the 3.4% inflation rate, indicating that tenants are still facing huge cost increases. According to the last census, there were 5 million privately rented homes in England and Wales.

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Luke Murphy, deputy director of infrastructure and housing at IPR, told The Independent that the structural problem of undersupply in the UK housing market remains the main driver of rising rents.

“This is a fundamental supply issue, we haven’t built enough homes for decades and that’s all types of housing. It’s not just about numbers, it’s about building more truly affordable social housing. question.

“Our analysis shows there is a housing shortage of four million homes over ten years and we are nowhere near building the number of affordable homes we need. This has an impact on the rents we are seeing.”

Cara Paciti, senior economist at the Resolution Foundation, said average rents in the UK are now a fifth higher than they were in February 2020, before the pandemic.

“With inflation falling and earnings growth slowing, we can expect some better news on the horizon, and indeed, market data for new tenant rental prices has slowed in recent months. However, even as we start to see rental prices Growth has slowed and private renting remains by far the most unaffordable, least secure and lowest quality housing tenure.”

Another mitigating factor could be a slowdown in the homebuilding industry due to high interest rates, rising raw material costs and falling demand.

Another problem, financial experts believe, is that the costs have been passed on to buy-to-let landlords as their fixed-rate mortgages expire and they start new deals with higher monthly premiums. These costs are passed on to tenants.

Jonathan Gordon, director of wealth management at IP Global, said current rental conditions in the UK were “brutal” for tenants.

He said: “Landlords face rising costs, which in turn lead to rising rents for tenants. This creates an extremely difficult situation for renters in the UK, as wages often do not keep pace with rent increases.

“While house prices have fallen slightly, continued high demand for housing suggests prices are unlikely to fall significantly.”

Michelle Lawson, director at consultancy Lawson Financial, said: “These figures sound grim but are not surprising. Landlords in the private rented sector are reeling from rising mortgage rates and huge tax bills. and increased costs from cumbersome and costly regulations.

“The unintended consequences of this situation mean that tenants, some of whom are already on the edge financially, will suffer in the long term.”

Ben Twomey, chief executive of Generation Rent, believes rising prices are not just due to rising costs for landlords, as half of all rental properties do not have a mortgage.

He said: “These figures are shocking but not surprising – we have been feeling the impact of sky-high rents and unaffordable rent increases since 2021 and we have reached the limits of what we can afford.

“As the cost of living crisis eases significantly, the rental cost crisis continues. Renters are being squeezed to the absolute limit and something has to give; the 9% increase in one year for all tenants is far greater than the increase in our wages, which shows How protected tenants are.

“It’s not just that landlords’ costs are rising – more than half of private rented properties don’t have a mortgage – so it’s clear that landlords are raising rents simply because their tenants have no choice but to pay those prices.

“The Government needs to listen to tenants and take decisive action to curb soaring rents in the worst-hit areas. Banning unaffordable rent rises will provide much-needed breathing space for renters, while the Government must start building a more affordable society housing to address the shortages that create this situation.”