In this blog, TDS looks at key trends in the cost of rent and supply of privately rented properties across the UK for the final quarter of 2023. The data shows that tenants living outside London and those in rural areas are being hit hardest by rental increases.
Rental increases at record levels but burden shifts from London
In December 2023, Hamptons recorded an average rent increase of 10.2% for new lets across the UK, the highest increase since Hamptons’ first records in 2014.
Covering both existing tenancies and new lets outside of London, the ONS recorded rate of 5.9% was the highest since January 2016.
Although London experienced the highest increases for most of 2023, Zoopla found London’s growth in rents for new lets slowed down by November 2023, whilst rents in other cities kept at pace.
Meanwhile, research by the TDS Charitable Foundation, reported on a rental increase of 27% on existing and new tenancies in English rural areas, indicating a shift in the burden from London to regional areas.
Rent increases across the UK
In November 2023, the ONS found annual rent increases for existing and new lets to be highest in Wales (7.3%) when compared to Scotland (6.2%) and England (6.1%).
Based on agreed rents (rather than asking rents) for new tenancies, HomeLet found annual increases to be highest in Northern Ireland (12.5%) when compared to the UK average of 8.9%.
Demand decreases but supply remains a key issue
The mismatch between supply and demand has been an ongoing issue exacerbated by multiple factors such as rising demand, longer tenancy lengths and insufficient policy initiatives to improve the availability of affordable housing.
There is some indication that the gap between supply and demand has started to reduce. In December, Zoopla recorded an 11% decrease in demand for rented homes, whilst RICS have recorded the lowest reported demand increase since January 2021.
However, lack of supply remains a key issue impacting on affordability, as competition over a limited supply results in upward pressure on rents.
42% of tenants are struggling to afford rent according to the latest Voice of the Tenant Survey from TDS.
Unfreezing the Local Housing Allowance will make it easier for some tenants to access housing but, without sufficient government initiatives, pressure on the Private Rented Sector is likely to grow following the entry of new tenants who were previously unable to access the sector.
Other exacerbating factors include high mortgage costs preventing tenants from moving into home ownership. Similarly, the Bank of England reported that the share of gross mortgage advances for buy-to-let purposes was the lowest since Q3 2010. This indicates a potential disinvestment in private rented housing.
Zoopla anticipates a fall in rates for 2024 (especially in London). However, unless more is done to address wider issues, this may only result in a redistribution of the issue, rather than its disappearance, as rent hikes are disproportionately increased for regional tenants.
The views expressed in this content are solely those of the author alone and do not necessarily represent the views of TDS, its officers, or employees.
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