Recent figures from Dataloft show that Brits under 30 are facing a cost-of-renting crisis with four-in-ten now spending more than 30% of their pay on rent – representing a five-year high. Rents in the UK have risen by an average of 8.3% over the last 12 months – pushing rents to 15.7% above pre-pandemic levels. July 2020 and July 2022 marked the largest erosion of tenants’ buying power since the launch of Hamptons lettings index in 2013. Rent, on average, has risen 16.2%, or £165 a month.
Inner London saw the fastest rental price hike in the UK over the past year as rents climbed 33.6% compared to the same time last year. The rental market applies pressure on young people’s finances which are already strained due to rising living costs and plateauing in income levels. The least affordable areas for renters under 30 are, unsurprisingly, located in London with under-30s spending an average of 35% of their monthly earnings on rent.
This comes amidst new research from the Office for National Statistics (ONS) which revealed that the annual rate of growth in UK house prices has taken a sharp fall, from 12.8% to 7.8% in a month. However, the same report also showed the average value of a house in the UK increased by £3,000 in June, bringing the figure up to £286,000. This comes after online realtor, Rightmove, revealed that in August, the average price of a property dropped to £365,173, marking a £4,795 decline on July’s figures. Now, it seems that soaring interest rates – in response to the country’s severe inflation woes – could start to weigh down the housing market in the second half of the year. The average price now stands at £294,845, which represents a 6.8%, or £18,849 rise since the start of the year. This means that house prices have risen every month over the last year as the supply-demand imbalance continues to be the main contributor to this. Indicating major obstacles it the UK property market to both buyers and renters.
David Hannah, Group Chairman at Cornerstone Tax, discusses:
“There is still a real lack of supply within the UK property market which continues to affect not only buying but also renting. The current economic climate has made it harder than ever to save for a house deposit which means that renters – especially those under 30 are in danger of being stuck in the rental cycle for a while. Rental budgets are likely to be squeezed even further by landlords looking to increase rent to cover their increased mortgage costs.
“Overall, I expect demand for UK housing to continue to outstrip supply – pushing price increases ahead of inflation and provided wages are increased, the affordability of housing could stay in lockstep.”
Simon Bath, CEO of iPlace Global, the creators of Moveable, comments:
“In order for rental prices to drop, there must be more of a focus in overcoming the supply and demand imbalance. The government’s failure to deliver on their promise of 300,000 new homes a year has meant that domestic developers have come to the forefront of alleviating this issue. We are already seeing this through the increase in the number of sellers, and we have proprietary research showing that almost a quarter of millennials are now looking to buy a home to develop, not to live in or rent.
“Hopefully, this can further help to put the brakes on rising rental prices over the next year, with less competition making it easier for rental prices.”
