1 May 2024 – Recent data from Rightmove confirms the immediate need for the country to prioritise good-quality rental homes.
Figures for the first quarter of 2024 may signal improvement in the rental market. However, if we consider the market’s pre-pandemic health, it’s clear the UK still has an ongoing rent crisis.
Rent still higher than pre-pandemic prices
For the 17th consecutive time, the cost of renting a property in the UK has gone up. The average rental price is now 8.5% higher than in 2023.
Londoners’ average monthly rent rose to a new record of £2,633. In other words, rent is 5.3% higher than last year, although it has considerably slowed since the peak of 16.1% in the second half of 2023.
Meanwhile, the average rental price outside the capital now stands at £1,291 per month.
Ultimately, a comparison of Rightmove’s Q1 2024 and Q1 2019 Rental Price Tracker reports shows that rent is much more expensive now. To recap, the average asking rent per month (excluding Greater London) in 2019 was only £796.
Rent growth slowed down
Interestingly, rent growth has shown signs of slowing down. London’s current record-breaking rent is only two pounds higher than the previous one.
It’s no coincidence that reductions are now at a five-year-high. Properties with price reductions are now reported to account for 22% of the rental stock—up from 2023’s 16%.
In other words, landlords are reducing rent to cater to more customers with tighter budgets.
So, if you’re looking for a larger property to rent, there’s no better time than now. Larger homes, including four-bedroom detached houses and all five-bedroom properties and above, are most affected.
At the time of writing, 30% of top-of-the-ladder properties have had their prices slashed, a new record since 2012.
50,000 more rental properties needed
Recent data shows that the supply of rental properties available to tenants is 11% higher than last year’s. In theory, the rental market should be starting to settle down. Especially when you consider that the number of potential tenants in the market for new homes has dropped by 17%.
Unfortunately, this figure is still 54% higher than pre-pandemic levels.
Rightmove says letting agents have had to handle almost three times more enquiries per rental property as opposed to five for March 2019.
In other words, demand still far outweighs supply, at least compared to figures from the pre-pandemic. The property website suggests that 50,000 more rental properties would be needed to recover the pre-pandemic supply.
Stamp duty stopping landlords from adding to rental stock
Stamp duty surcharges discourage landlords from investing in additional rental properties in southern England with above-average house prices.
It’s interesting to note that the 2015 peak of 52% was right before the introduction of the surcharges in 2016.
Since then, figures have consistently fallen. A Paragon Bank analysis revealed that in 2022, the number of buy-to-let properties was down to 39%.
The figures for 2023 aren’t any better, at 35% for the South East, Greater London, and the South West.
Paragon Bank’s Managing Director of Mortgages Richard Rowntree reasserts the call for “more rental homes and a vibrant private rented sector across the UK.” With the population projected to increase by 6.6 million by 2036, there is an immediate need to address the rent crisis in areas with a higher transient population, such as London.
The government should provide more incentives for landlords to invest in rental properties. It may even come to the point of waiving surcharges in the name of stimulating supply.
Our Opinion
With the average rent in the UK now over £1,000 per month, renting is no longer the cheap option. But at the same time, getting on the property ladder isn’t easy either. The cost of borrowing is still high, and property prices are still a lot higher than before the pandemic.
This causes a dilemma for many renters: high rents keep them from being able to save up for a deposit, this prevents them from being able to get on the property ladder. Add high borrowing costs to the mix and you have a perfect storm.
So all many can do is stay put and hope for better conditions in the next few years. The amount of new rental properties needed to solve the rent crisis seems staggering.
But given that consecutive governments have made it challenging for landlords to increase their properties, it’s no wonder.
However, it does also look like many wannabe first-time buyers are lowering their expectations, so they can make the move into homeownership. This has been shown by recent news that first-time buyers now make up a third of all buyers.
By adapting their wishes and compromise to afford a home, many first-time buyers are beating the odds. And with rents at such a record-high, it’s likely that this is a trend that will continue.
