The rental market in the UK has experienced an unprecedented surge in prices, as data from the Office for National Statistics (ONS) shows a record 9.2% increase in rents over the past 12 months. This surge marks the highest annual percentage change recorded since 2015, raising concerns over affordability for tenants, especially in London. Scotland saw the most substantial increase, with rents skyrocketing by 10.5% to an average of £947 per month, while England and Wales also witnessed significant rises of 9.1% and 9%, reaching averages of £1,285 and £727 per month, respectively.
London, known for its already high rental costs, experienced the most significant jump in rents, rising by 11.2% over the past year. In contrast, the north-east of England saw a more moderate increase of 6.1%. Areas like Kensington and Chelsea in central London remain the priciest for renters, with average monthly rents at £3,305, while Bristol follows as the most expensive area outside London at £1,748 per month. On the other end of the spectrum, Dumfries and Galloway in Scotland emerged as the most affordable region, with average rents at £475 per month.
The sharp rise in rents has intensified the cost of living pressures faced by tenants in recent years, attributed to an imbalance between supply and demand fueled by factors like increased rental demand, soaring house prices, high mortgage rates, and record levels of net migration. Landlords' hesitance to expand their property portfolios amid rising borrowing costs and regulatory constraints has further compounded the issue. Experts suggest that tenants may soon hit affordability limits, signaling a potential shift in rental market dynamics towards aligning rents with salaries and affordability.
In a related development, house prices in Britain saw a 0.7% increase between January and February, the most significant monthly gain since 2022. However, economists predict a slowdown in house prices in the near future, particularly with the rise in mortgage rates, indicating a possible change in the housing market landscape.