Tenant Demand For Rentals High But Supply Is Low

Rents are stoking inflation by going up faster than the cost of living. 

Private tenants saw rents increase by 4.9 per cent in the year to February while inflation is running at twice the rate (8.9 per cent).

The increase was the highest annual figure since the Office for National Statistics started keeping records in January 2016.

According to mortgage lender Nationwide, rent is on the opposite trajectory to house prices, which have decreased over the past three months.

The highest increase was +5.1 per cent for the year to March in the East Midlands, while the smallest gain of 4.2 per cent was in the South East.

London landlords pocketed a 4.8 per cent rise - the highest annual increase since December 2012.

“The annual growth rate of private rental prices in the UK began to increase in the second half of 2021. Annual growth was seen across all regions except London, where prices decreased. The annual percentage change in rents increased across all regions in 2022, including in London, which has continued in early 2023,” said the ONS.

How rents changed where you are

Although the East Midlands heads the regions for the most significant year-on-year rent increase with a 5.1 per cent rise, the figures for UK regions are tightly grouped between four and five per cent increases:

Buy to let demand high

Tenant referencing specialists Homelet has reported that UK rents surged by 9.8 per cent in the year to March - hitting an average of £1,184 a month.

Excluding London, average UK rents are 9.1 per cent up on 12 months ago at £993 monthly.

Rents in the capital are 11.8 per cent more than in March 2022, to £1,979 a month.

“It’s fair to say that demand for rental properties remains exceptionally high,” said  HomeLet CEO Andy Halstead.

“The lack of available properties means that the market is likely to continue to be very competitive, so landlords must remain vigilant, and tenants should be aware that finding a suitable property is proving to be a tricky task for many.”

Both ARLA (Association of Residential Letting Agents) and RICS (Royal Institution of Chartered Surveyors) confirm that tenant demand for private rentals is high, with fewer instructions from landlords.

ARLA estimates ten tenants are chasing every property for rent.

RICS predicts rents will rise to record levels this year as the supply of properties to let continues to fall.

How rents have changed

London has the highest rents and the most significant rent growth, while the South West saw the lowest increase.

Source: Homelet