How the cost of renting has soared 10.4% in a year

Rental costs in Britain have risen by 10.4 per cent over the past year and in some areas monthly expenses are two-fifths of a typical income.

Over the past 21 months, rental inflation has outpaced earnings growth, according to new data from Zoopla.

As a result, rental costs as a percentage of income are the highest in ten years.

Edinburgh has seen the highest rental inflation in the last year – they are up 13.7 per cent to £1,130 a month.

A total of seven cities, including the Scottish capital, have experienced double-digit rental inflation over the past year: London, Manchester, Glasgow, Southampton, Aberdeen and Cardiff.

Overall, the average rent across Britain has increased by about £106 a month to £1,126.

Rent now accounts for 28 percent of a renter’s pre-tax income, slightly higher than the 10-year average of 27 percent.

In London, rents account for 40 per cent of tenants’ gross income, but this is below the 2015 high of 43 per cent.

Richard Donnell, Zoopla’s executive director, said: ‘Renting costs are at their highest in a decade with emerging signs of stress for some tenants, particularly those on lower incomes.

“Boosting the rental supply is the most important policy lever to support a healthier and more sustainable rental sector.”

As demand for rental properties continues to outstrip supply, Zoopla expects unaffordability to begin to put a damper on inflation, slowing it to about 8 percent by the end of the year.

But even at this rate, it will still outpace wage growth.

Lack of supply is a major factor driving up prices. The number of available rental properties has fallen by a third compared to the five-year average.

And demand is only likely to increase as rising mortgage rates affect first-time buyers, the strong job market, high immigration and the upcoming busiest period for rental demand – between July and September.

This means that more tenants are hunting for fewer houses, putting additional pressure on rental inflation.

Similarly, there is little chance of an improvement in supply in the second half of this year, which would require “an increase in new investment from corporate and private landlords” as higher borrowing costs deter investors.

In November, a third of tenants had to deal with a rent increase in the past six months, but this has now grown to more than half.

Rising rents and the cost of living means that more tenants find it ‘very difficult’ to pay rent, from 10 percent to almost 15 percent.

Citizens Advice assisted 2,000 no-fault evictions in May, the highest number of people recorded in a single month and 25 percent more than the same month last year.

So far this year, the charity has seen a 9 per cent increase in the number of people seeking help for these types of evictions, compared to the same period in 2022.

However, the supply could increase as the market stalls and fewer landlords sell their properties, opting instead to rent the homes they can’t sell.

Zoopla also argues that while some landlords are selling because of higher mortgage rates and the loss of tax breaks, the idea of ​​an “exodus” is being exaggerated.

Overall, there has been no change in the number of private rental properties since 2016, while the pace of landlord sales has remained the same since 2018.

Currently, one in ten homes for sale on Zoopla are former rentals, a figure that has remained more or less the same over the past three years.

But that doesn’t mean landlords are unaffected. While Zoopla estimates that just under two-fifths of landlords are mortgage-free, 20-30 percent have high loan-to-value loans and are most at risk from higher interest rates.

According to Moneyfacts, the average two-year fixed rate for buy-to-let mortgages is currently 6.4 percent, up 0.1 percent in just twenty-four hours.

The average five-year fixed-rate agreement is 6.29 percent. For those with low equity in their property, the rise in interest rates increases the likelihood of a sale as they approach refinancing.