Although owning property may seem more manageable now due to the falling prices, renting scenario isn’t as promising due to the skyrocketing rents. Rents spiked by 12% last year, which amounts to £117 per month (or £1400 per year). This is more than the wage increase, which is about 6% in the past year.
Rental affordability is at the highest it has been in a decade, at 35%. It is the percentage of income that goes as rent from a person renting a property. The rental market consists of new lettings (a quarter of the market) and continuing lettings, which account for 75% of the market. These are people who decide to stay put, even though there may be changes in rent. The supply issue in the rental market is getting compounded as renters are opting to stay in current rentals and face higher rent.
Will rentals get cheaper?
The current demand and supply situation in the rental market is a cause of concern amidst rising rent rates in 2023.
– Demand has increased by 46% while supply is less by 38%.
– Rental prices have spiked.
– Potential first-time buyers are opting to continue renting due to rising mortgage rates. Hence the demand rate is worsened.
– The current pace of renting worries private renters, specifically those on a low income, as it has worsened the cost of living and related pressures.
– If the rate of rental spike continues at 12% in 2023, renters would have to spend as much as 37% of their earnings to cover rent.
– This would only be feasible for some and could affect spending power with a significant impact.
– Combined with only a slight improvement in supply, it could lead to a slump in the rental market, with growth as low as only 5% in 2023.
The only way to make renting cheaper than it is now would be to boost the rental supply, which does not seem too likely in the coming months.
Will rental supply improve?
Rental supply could improve modestly in the few months ahead. Homes that have been put on rent have increased slightly since the sales market has weakened. Those looking for the opportune moment to sell have kept their plans on hold due to the uncertainty in the sales market and have instead put their homes on the rental market.
However, rental inflation is still high due to increasing demand, thus adding to affordability concerns for renters. As a result, more renters are –
– Sharing homes to spread out the expenses and costs
– Choosing to live with parents
– Opting for smaller homes
Does the rental market look promising in 2023?
As per proposed rules and regulations, private landlords who own expensive homes are more likely to sell up due to the difficulty in managing expenses. Losses in such rented homes will impact new investments pouring into the build-to-rent properties.
The rental market will witness more demand, and it is vital to invite more supply from landlords – private individuals or corporates.
If you are interested in renting a property in the United Kingdom or searching for rental properties, please get in touch with us at Glentree Estates.