Rents across the UK rise to record highs

The property market’s outlook for 2023 might remain uncertain, but rents across the country have climbed to record highs and look likely to continue doing so. 

Some analysts are predicting house prices could fall 30% this year, but the latest figures from online estate agent Rightmove showed prices in the rental market remain highly inflated. 

The average monthly asking rent across Britain hit a record £1,172 a month in the fourth quarter of 2022, representing a 9.7% increase in asking prices for newly listed properties in 2022. 

In London tenants are being asked to fork out over twice that amount, with the typical private rent hitting a high of £2,480, a 5.8% increase from the previous quarter. 

Rents in inner London hit £3,010 – surpassing the £3,000 mark for the first time ever. 

As well as having to contend with rising inflation and an impending interest rate rise, renters are being asked to pay record amounts for homes. 

The figures might also make buy-to-let investors wonder if now is a good time to invest in property. If you are thinking about purchasing a home to let out, it’s worth looking into the best areas for buy-to-let in the UK. 

We look at why rents are increasing and whether now could be a good time to buy a house. You may also be interested in our article on buying vs renting. 

Why are rents increasing?  

Rising rent prices have been exacerbated by chronic supply and demand imbalance. According to Zoopla’s rental market report, released in December, the stock of homes for rent is 38% lower than the five-year average. 

Additionally, according to Zoopla, the stock of rental homes has been the same since 2016. 

Many people opted to leave cities for the countryside throughout the pandemic as they worked from home. However there have been reports of aggressive bidding wars as commuters returning to work search for homes. 

Some of the increased demand has been due to rising mortgage rates, which is delaying buyers’ moving plans.  

“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,” says TIm Bannister, Rightmove’s director of property science. 

“Letting agents are seeing extremely high volumes of tenant enquiries and dealing with tens of potential tenants for each available property.”

Where next for rental prices? 

“There is no sign of the rental market slowing down due to the continuing imbalance between supply and demand,” says James Redington, sales & lettings director at Douglas & Gordon. 

“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.” 

Rightmove is forecasting the pace of annual growth will ease to around 5% by the end of the year nationally, but that’s still significantly over the average of 2% that the sector averaged saw pre-pandemic. 

But there are some signs the supply vs demand imbalance might be starting to ease, according to Rightmove, especially compared to the record low levels of last year. 

The number of available properties to rent in December was up 13% year-on-year. Competition between tenants for available properties also dropped 6% year-on-year compared to this time last year, and 33% from September’s peak. 

But the number of properties to rent is down 38% compared to 2019, and the number of people enquiring is 53% higher. This means the supply vs demand imbalance that’s pushing up rent prices is not going anywhere. 

It would take a “significant addition of new homes to rent to bring the gap between supply and demand anywhere close to a better balance this year”, the report said. 

What does this mean for landlords? 

Landlords face a tricky landscape given the effect the rising cost of living is having on tenant’s budgets. 

“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,” says Bannister. 

However landlords are still receiving several applications, “due in part to [their] cautious approach when considering rent increases at renewal stage, preferring to retain good tenants rather than having even a small void period or incur the associated costs”, says Simon Leigh, director at Hackney & Leigh. 

“The government’s continued pressure on landlords through tax changes, along with growing financial commitments on rental properties can be off-putting to existing landlords and people looking to invest in a buy-to-let,” says Redington.