Record High Rents in the UK Prompt Calls for Increased Housebuilding
Average monthly rents in the UK have reached record highs, with rents outside London rising by approximately 7 percent since last year, according to property site Rightmove. The average advertised rent outside London now stands at £1,316 per month. Meanwhile, in the capital, the average advertised rent is £2,652 per month, which is a 4 percent increase compared to the previous year. These figures far surpass the rate of inflation, which dropped to 2 percent in May.
Rightmove has urged the next government to prioritize housebuilding and incentivize landlords to invest in more rental properties to address the supply and demand imbalance in the rental market and stabilize yearly rent growth. The property site highlighted that although the pace of rental price growth has slowed from its peak of 12 percent two years ago, it still remains significantly higher than the pre-COVID-19 level of around 2 percent per year.
Scotland is currently experiencing the greatest demand and supply imbalance, with demand outstripping supply. In contrast, an improvement in the balance between supply and demand in London has contributed to a slowing of rental price growth.
Rightmove’s property expert Tim Bannister emphasized the need for improvement in the planning process, an acceleration of housebuilding, and increased supply in the rental market. He noted that there was a time before the pandemic when rental price growth was more stable.
Data from Propertymark, a professional body for estate and letting agents in the UK, revealed that there were around nine new applicants registered for each available property in May. While most members reported rising or static rents, there was some positive news for prospective tenants, with 18 percent of firms reporting rent decreases in May compared to 12 percent in April.
Propertymark CEO Nathan Emerson stressed the importance of reforming the tax system to attract more investors to the private rental sector and ultimately lower rents for tenants in the long term. He also highlighted the need for a sensible and deliverable program that takes into consideration the protection of green belt areas.
The rise in rental costs coincides with the news of increasing house prices in the UK. According to a Nationwide Building Society housing index report, house prices rose by 0.2 percent in June following a consistent month-on-month increase. The average price of a home across Britain is now 1.5 percent higher than in June of last year, with an average cost of £266,054. This amount is almost eight times the average annual gross income of £34,963.
Despite high interest rates, UK house prices are only 3 percent lower than the all-time price record set in the summer of 2022, as stated in the index report. In May, housing prices experienced a growth rate of 0.4 percent. The continuation of high interest rates and an increased market supply of houses have contributed to relatively stable prices.
In April, the average UK house price was £281,373, which is approximately eight times the average annual gross income.
In conclusion, the record high rents in the UK have raised concerns about the need for increased housebuilding to address the supply and demand imbalance in the rental market. The next government is being urged to prioritize measures that would incentivize landlords to invest in more rental properties and improve the planning process. At the same time, efforts to reform the tax system could attract more investors to the private rental sector and potentially lower rents for tenants in the long term. Additionally, while house prices have been steadily increasing, they remain relatively stable due to high interest rates and an increased market supply of houses.
