English Living
Residential Market
Rent increases hit record high for fourth consecutive month – property expert reacts
Rents are up 5% in the year up to May 2023
This comes as the average British tenant now spends more than 28% of their pre-tax earnings on rent, marking the highest level in a decade
David Hannah, Chairman of Cornerstone Group International – the UK’s leading property tax experts – discusses the current state of Britain’s rental market
The Office of National Statistics (ONS) has reported that a record increase in rental prices has been recorded for the fourth consecutive month, rising by 5% between May 2022 and May 2023. This comes as the average Brit now spends 28% of their pre-tax earnings on rent, the highest in a decade. In light of this, David Hannah, Chairman of Cornerstone Group International – the UK’s leading property tax experts – explains what is behind these record rises and outlines what is in store for the rental market in the second half of 2023.
The ONS's findings come on the back of the Bank of England's (BoE) decision to raise interest rates for a historic 13th time. With interest rates on mortgages now over 5%, the 1.5 million households with fixed mortgage deals set to expire this year are facing a sharp rise in repayments, forcing many to look to the rental market as a cheaper alternative to owning their own homes.
However, demand for rental properties has surpassed the available supply in many areas of the UK as landlords continue to flee the buy-to-let market. According to Hamptons, almost 100,000 landlords per year are expected to leave the market in the next half-decade, leading to inflated prices. Hannah points out that increasing mortgages and government red tape for landlords have caused this exodus, especially due to the newly proposed Renters' Reform Bill and the costly changes to Energy Performance Certificate (EPC) standards for all rental properties by 2025.
Chairman of Cornerstone Group International, David Hannah, discusses the future of the UK’s rental market:
"Rising rental costs in the UK are creating a dire situation for tenants, especially those on lower incomes. With the highest share of pre-tax income spent on rent in a decade, and average rents surging by 10.4% annually, affording rental properties has become increasingly challenging.
“The shortage of available rental homes adds to the problem, as demand heavily outweighs supply. This situation not only affects renters but also hinders those seeking to transition from renting to homeownership, with securing a mortgage becoming impossible for many. It is crucial to address the factors behind escalating rents, including increased demand, limited rental supply, rising mortgage rates for landlords, and potential rent control measures, to ensure long-term rental affordability."
“Concerningly, I fear that increasing mortgage costs will be the final straw for Britain’s landlords. They have now experienced their lowest profits since 2007 and face further government red tape. Our research shows that many landlords were not prepared to deal with the current obstacles facing the rental market as 1 in 5 say they became landlords without the sufficient knowledge needed and have lost thousands as a result.”
David Hannah, Chairman
