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Inflation and the cost of living don't seem to matter when renting a home privately, as official data (December 2022) shows rents in England are growing faster than ever.
Rents have hit their highest level in almost five years, with growth soaring from a low of 0.9 per cent yearly in November 2018 to a rise of 4.2 per cent in December 2022 - the highest figure since records started in January 2012.
And after two years of poor performing divergence, the buy-to-let market has picked up in London.
Private rents increased by 4.1 per cent in England, 3.5 per cent in Wales and 4.4 per cent in Scotland in the year to December 31, says the latest monthly rent report from the Office for National Statistics (ONS).
The capital clawed away from the bottom of the regional league table with a 4 per cent annual increase, slightly ahead of the West Midlands (3.9 per cent), the North East and South East (Both 3.8 per cent).
Rents are rising the fastest in the East Midlands, which posted a 5 per cent rise for the year.
“The annual change in UK private rental prices paid by tenants remained steady between November 2019 and the end of 2020. The annual percentage change in rents slowed in early 2021, which was driven by the slowdown, and later reduction, of London rental prices,” says the ONS.
“This may have reflected lower demand in London because of the coronavirus (COVID-19) pandemic. For example, remote working meant workers no longer needed to live close to offices, and housing preferences changed.
“Private rental prices in the UK increased in late 2021, with widespread annual growth across all regions except London, where prices decreased. The annual percentage change in rents increased across all regions in 2022, including in London.”
The chart shows that rents across the country have soared to record levels after years of plateauing.
How rents performed across the English regions in 2022.
Homelet's figures are slightly at odds with the ONS, and the Homelet data comes from the landlord and letting agent tenant reference checks.
The company says average UK rents dropped in December for the first time in a year - down 0.1 per cent from November to £1,174 monthly, while London rents tumbled 0.2 per cent to an average of £2,007.
But every region continued to see annual rent growth.
Overall, UK rents increased by 9.4 per cent in the year.
HomeLet CEO Andy Halstead said: “The last month of 2022 saw the first drop in the average UK rental price for over a year, albeit a drop of just £1 month-on-month. Even in the face of a minor dip, rental prices remain historically high, including December 2022 being only the second month on record in which the average Greater London rental property has been priced higher than £2,000 a month.
“The cost-of-living crisis is continuing to bite, and the current situation is offering little to ease the fears of landlords concerned about their tenants’ ability to pay their rent. Our research found almost half (40%) named inability of tenants to pay their rent as their main fear for 2023.
“Our prediction for 2023 is that rental prices will continue to rise, despite spiralling costs for tenants in other areas of their lives. Tenants struggling to pay their rent is sadly likely to become a recurring theme across the country, and in turn, this could lead to some landlords leaving an already struggling market. This will likely result in a continued shortage of rental properties to meet demand.”
Check the data carefully. The various indices cover different periods, and the demographics of the samples vary between reports.
The Office for National Statistics (ONS) has the most extensive sample, so it should return the most reliable figures. Still, the time to collect and analyse the statistics often means the ONS data lags a month behind the rest of the sector.
The Association of Residential Letting Agents (ARLA) derives insights from letting agents and provides a sentiment survey rather than measurable data.
Homelet statistics come from customer data, which may not fully reflect the market.
Fixing rents is a business decision for landlords. Rent statistics indicate how the market moves but do not reflect demand from tenants and property standards in local neighbourhoods.
Don't forget that the data is historical, showing what's happened rather than what will happen.
Check the data carefully. Other indices cover different periods, and the samples vary between reports.
The ONS has the most extensive sample, so the most reliable figures should return, but the time to collect and analyse the statistics often means the ONS data lags behind the rest of the sector.
ARLA derives insights from letting agents and provides what's known in the trade as a sentiment survey based on what they think rather than data.
Homelet statistics come from customer data, which may not fully reflect the market.
That's a business decision for landlords. Rent statistics indicate how the market moves but do not reflect demand from tenants and property standards in local neighbourhoods.
Don't forget that the data is historical, showing what's happened rather than what will happen.
That's up to individual landlords. For instance, one index with a solid customer base in the same area as a landlord's portfolio may align more closely with market rents for that neighbourhood.
Average data is not good if you don't have an average home, and median rents will cover everything from a room in a shared house to a four-bedroom home.
Extra research with local letting agents is likely to indicate better where a landlord should pitch a competitive rent and stop them from under or over-selling.