According to Zoopla, the average rent has risen by £115 per month since September last year, to £1,051 a month in September 2022.
The rise is substantially outpacing earnings growth across the country and boils down to a catastrophic imbalance between supply and demand.
The lack of supply has led to dwindling options on the market for renters, as rental stock levels sit at around half the number seen on the market in the past five years.
Many renters will find themselves in good financial stead, by choosing to stay put in their current rental homes to avoid future rent increases and growing competition elsewhere on the market.
Renters return to the city
Growing employment rates in the wake of the pandemic, and a growth in high-quality, purpose-built build-to-rent homes appearing around the UK, is drawing more renters into urban areas.
The appeal towards energy efficient new-build homes is proving to be a big pull towards renting in the city, as most new developments tend to be around city centres, and renters will seek out a low EPC rating to stay on top of energy bills.
Rents for tenants remaining in current homes rising at a much slower pace
The average renter will move every four years, according to Zoopla, so their data reflects rent prices on new lets for around 25% of the market.
However, the Office for National Statistics’ (ONS) rental index outlines rental increases across the board, for both movers and non-movers.
The data shows current rents across all rented homes have seen a 3.7% increase, compared to the average recorded in July 2021.
Those moving to a new rental property will find the cost of renting 12.3% higher, as rents for new lets are correlating to the decline of supply amid high demand across the country.
How much higher can rents go?
While rental affordability varies according to location and income, in the latest English Housing Survey from 2020 to 2021, three quarters of private renters agreed they found rental payments very or fairly easy to meet. The remaining 25% found them fairly or very difficult to pay.
The question of how much higher can rents go, will depend on how much headroom renters have, to pay more rent.
While competition and demand continue to skyrocket, landlords have no reason to believe there isn’t opportunities for above-average growth in the less expensive areas of the UK.
What to expect in the rest of 2022, going into 2023
There are no signs of significantly improved rental supply in the near term, as private landlords continue to sell off homes, and renters remain for longer terms.
The imbalance between supply and demand will also remain unwavering, and rents will continue to grow at above-average levels well into 2023.
There are clear signs of headroom for some renters to pay more. Especially in areas of the country where rent is already high.
There may be a cool-down period emerging further into 2023, but this will come at a slow pace.
As well as avoiding rising rental prices, tenants will look to find smaller rental properties to keep their energy bills low. However, the horizons for options on the market should broaden, as the economy begins to recover.
The climate of the rental market can only benefit from more homes appearing on the market, which will help to close the gap between supply and demand.
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