Private rental rates in the United Kingdom are growing at their sharpest in 5 years, putting a strain on millions of people. According to the Office for National Statistics, the average cost of renting in the United Kingdom increased by 2% in 2021, the biggest yearly rise since 2017. Inflation touched 5.5 percent in January, putting more strain on the economy to help low-income households.
According to Winchester letting agents, the present cost-of-living problem has touched almost every element of the economy.
Looking at the figures
Although energy and food prices are rising, many Brits are concerned about their ability to manage rent as the cost of renting a property continues to grow. According to statistics from this year, many British households are £1,000 worse off this year than they were last year, with costs growing while earnings stay stagnant. According to the HomeLet Rental Index, rental rates have grown by 8.6%, reaching a new high of £1,069 in February 2022.
In addition to rising inflation, which is expected to exceed 7% in April, factors such as the Russia-Ukraine war have indeed added to the UK’s predicament. As a result of the hike, a single earner may now expect to pay 37 percent of total income on housing, compared with 34 percent in 2021.
Despite the present rapid increase, the actual increase in rent in the last five years is closer to 12%, owing to rent declines during the pandemic.
First, the epidemic lowered the demand for real estate. This was due to the fact that more individuals were working remotely, making proximity to workplaces in the city less relevant. Fewer international visitors also equalled fewer short-term rentals. Second, according to Rightmove statistics, an abundance of homes had given tenants more options and driven prices down.
But now, renters, particularly office employees and students, are returning to cities, causing rental costs to rise. Demand has outstripped supply, and there were 71% fewer rental properties available on London’s property market in December than there were a year ago.
How is the cost-of-living problem linked to renters?
Renters are hurting more than homeowners in the present crisis, according to TSB data, with owners spending £525.90 per month on mortgage payments. Renters, on the other hand, are in greater need of a security net since they do not have a home to offer as collateral.
According to Scottish Widows research, just 5% of tenants have critical illness insurance, 3% have income security, and 24% possess life insurance.
Due to rising property prices, the average age of first-time purchasers is rising, with many younger people unable to afford a home.
Will the government step in?
The company Legal & General indicated it would invest an extra £2.5 billion on its “build to rent” programmes over the next five years, prompting calls for government action. In order to capitalise on the rising market, the company plans to build over 7,000 purpose-built rental houses in UK towns and cities.
For the next five years, rent hikes for L&G blocks are regulated at 5%. According to ONS statistics, house prices throughout the country have also reached new highs. In December, the average sale price of a home in the United Kingdom was £275,000, up 10.8% from a year earlier. It was the largest gain in over two decades.
However, relative to the entirety of the UK, the London property market has more highs and lows in rental prices. As the impacts of COVID on the economy fade, a sharp increase later in the year cannot be ruled out.
What changes in rental prices can we expect?
Understanding how these ONS pricing series are constructed is critical for forecasting future rent levels. The numbers cited thus far are from IPHRP, which is based on data submitted to the government for daily activities such as health records.
These numbers represent a stock of current tenancy contracts between landlords and tenants as well as freshly announced property rents. Because the latter is more sensitive to current market situations, the contrast between these two categories is critical. Existing tenants often sign six-to-twelve-month leases, which means their rents fluctuate less frequently.
On a private sector measure, the typical price appreciation in March 2022 is 10.2%. This is more than four times the ONS average, equating to a £63 rise in monthly bills for new tenants outside of London since March.
The fact that private rental measures are continuing to climb – and the ONS rate works with a six-month lag – implies that rental prices will continue to rise in the coming months.
This is worrisome for homes already experiencing financial hardship. The greatest contribution to the 6.2 percent March inflation rate, which was the highest in 30 years, was housing and household services.
The majority of this increase was due to growing energy prices, although high rents significantly pushed up owner- occupier housing expenditures. Both show no indications of slowing, implying that people seeking evidence that the inflation has peaked do not have relief.
What can tenants do in the face of rising rents?
Here’s how renters may stay out of financial trouble in the future.
Try to set aside roughly 30% monthly pay for rent. Remember to include additional monthly expenses like water, council tax, heating, TV licence, internet, phone, and other property service costs in your budget.
Rethink Size and Area
You may have to make compromises to ride out the cost of living problem, no matter how much you want to rent in a specific region or desire a particular size for your house. Instead, consider renting in a less desirable area for a lower rent, which will help you to save more quickly for a nicer apartment or even allow you to enjoy a higher standard of life.
Consult your landlord
If you’re having trouble paying your rent, talk to your landlord about it. Inquire about spreading the debt across many rent payments.
Because it is less expensive for them to agree to lower rent in the brief term than to have to locate a new tenant, your landlord will generally be accommodating and even agree to short-term affordability