Rental prices in the UK have increased by an average of £120. With London, Manchester and Glasgow all having the biggest rises by far.
As well as rising energy bills and food costs, rents have begun to increase rapidly in London. The average monthly rent is now higher than at any other point in history, according to the Office for National Statistics.
The government says they are taking action to give renters more rights, but is it not the simple rule of supply and demand driving price rises?
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The real cause of the rapid rise in rents
According to Zoopla, the UK average rent in December 2022 was £1,118, which is 11.5% higher than the previous year. Thankfully though, the pace of the rent increase has slowed since it peaked in July 2022.
The increase in rents has caused many renters to stay where they are instead of seeing what’s on the market. If you’re staying put, the pace of rental increases is slower, with an average increase of 4.2%.
So, what’s causing this rent increase? Unfortunately, there isn’t a single answer to this question. It’s a mixture of increased costs for property owners and landlords, economic factors and good ol’ supply and demand.
It has created a climate of competition between renters, and there are widespread reports from around the country of renters signing leases without even viewing properties.
The effect of the economy on prices in the capital city
High inflation and high employment have been massive drivers of rental growth, especially in London. London has had the highest price increases in the country, with an average increase of 16.1%. These increases are worst in inner London, which has increased 17.4%. As employment looks set to fall, the ability for Londoners to afford high rental prices will undoubtably go down.
The London Borough of Newham had the highest rate of rental growth in the country, with the average rent there increasing by 21.2% or £320 in 2022. The increase is as a result of popularity among professionals and students, regeneration projects and better transport links to central London.
However, high levels of rental inflation are not exclusive to London. Record-high increases have also hit Manchester and some Scottish cities in the prices of new lets. In Manchester, the average rent is now £977 per month, up from £847 in December 2021.
What does this mean for renters and landlords?
For those looking for a new place to live, the competition is fierce, and people are willing to pay more than they would have in the past. For the millions of Londoners that are opting not to leave their rental properties, price increases might be minimal. This works well for landlords, who are enjoying unprecedented control over the market.
There needs to be more affordable housing. Successive governments have sold housing stock off through schemes like Right to Buy, permanently taking affordable properties off the market.
For landlords to bring prices down, mortgage rates need to stop rising. This is a difficult thing to forecast and relies on overall economic growth. Even as the economy repairs itself as we eventually move through the stages of a boderline recession, pressure will be on both landlords and tenants in one of the most challenging housing markets in British history.