London leads record increase in rental costs across UK

RENTS across England, Wales and Scotland rocketed at their fastest pace on record as tenants were forced to compete for a dwindling stock of houses against the backdrop of rising mortgage costs.

In London, the city with the highest rental prices, they rose by 5 per cent from a year ago in April – the steepest annual rate since November 2012, the Office for National Statistics (ONS) said on Wednesday (May 24).

Landlords have been hiking rents to cover rising mortgage costs, and private tenants are competing for a limited supply of homes. The trend is a growing concern for Prime Minister Rishi Sunak’s government, with a cost-of-living crisis unsettling voters while the ruling Conservative Party remains divided on building more houses.

“We are seeing that demand for property continues to grow in the rental market, but there remains no increase in homes available to rent,” said Nathan Emerson, chief executive officer of Propertymark, the professional body for estate agents.

He said that while new legislation designed to make it harder to evict tenants “will undoubtedly have a knock-on effect, we desperately need more incentives for new and existing landlords in order to provide more homes for renters”.

Supply is constrained by an exodus of smaller landlords, many of whom are selling properties rather than face rising mortgage costs and a tighter regulatory and tax environment.

Yet more expensive mortgages and soaring property prices are also pushing increasing numbers of households – especially young people – into the rental market.

Average UK house prices increased by 4.1 per cent in the year to March, according to the ONS, down from 5.8 per cent a month earlier. This put the average home at £285,000 (S$476,032). That’s 2.7 per cent below the recent peak in November 2022.

Across the UK, private rental prices increased by 4.8 per cent from a year ago in April – the largest annual change since the series began in January 2016. This included a 4.7 per cent rise in England, a 4.8 per cent rise in Wales, and a 5.2 per cent rise in Scotland. Each of those readings were the largest since the ONS data began in 2006, 2010 and 2012 respectively.

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The highest increases in rental prices in the English regions were in London and Yorkshire and The Humber, both at 5 per cent. The lowest was in the North East at 4.2 per cent.

The increase reported by the ONS covers the whole stock of homes and masks huge price jumps in newly-agreed tenancies.

According to Spareroom, a site that allows renters to find a room in a shared property, the average monthly cost in London hit £952 in the first quarter of 2023 – up 20 per cent from a year earlier. Outside London across the rest of the UK, the increase was 14 per cent to an average of £598 per room. BLOOMBERG