New data from Hamptons has revealed that UK residential rents jumped by 12% in the year to August, marking the largest annual increase on record.
The average rent on newly let properties now stands at £1,304 as rising interest rates continue to increase mortgage payments with landlords passing on the rising costs to their tenants. In light of this news, David Hannah, Group Chairman of Cornerstone Tax – the UK’s leading property tax experts – discusses the current state of the rental market.
London has witnessed the largest increase with a 17% year-on-year rise pushing average rents to £2,332 a month, meaning tenants in the capital have experienced double-digit rent increases in 16 of the past 18 months. This comes as an exodus of landlords from the rental market continues as data from Cornerstone Tax shows that 23% of London landlords say they became one without sufficient knowledge and have lost thousands as a result.
The median London renter paid 30% of their gross income over the past year, the highest in at least five years on their rent according to DataLoft. Throughout the UK, the average rent now accounts for a quarter of earnings. Hannah points out that the reason for the increase in rent costs is due to landlords who have been affected by the increase in UK interest rates over the last 20 months. They have responded by raising rents paid by tenants where they can.
David Hannah, Group Chairman at Cornerstone Tax, said, “The rental market is currently experiencing an unprecedented surge in residential rents, with an average nationwide increase of 12 percent in August, the largest annual jump on record. In London it is particularly concerning as August marked the sixteenth time in the last eighteen months that Londoners have faced double-digit rent increases.
“This sharp increase in London’s rental costs has thrust the capital to the forefront of a nationwide battle to combat the soaring expenses of rent, a significant burden on millions of households.
“The impact of rising rents outpacing income growth has created a severe affordability challenge leaving millions in a dire situation. London’s mayor, Sadiq Khan, has called on the government for swift intervention, including granting him the authority to freeze rents in the city. The rental crisis is a national issue that demands further government action, including increased housing benefits and substantial investments to meet London’s affordable housing needs.
“Landlords must be considered also when introducing any new initiatives in the rental market. We have seen a continued exodus of buy-to-let landlords as it becomes a less appealing investment due to increased costs. Landlord rights must be considered, and regulations must be introduced to aid the number of buy-to-let landlords and in turn, increase rental supply in the UK which will alleviate the continued rise of rental prices.”