What's happening to the cost of renting?
The average UK monthly rent for newly let properties (excluding London) was £1,068 in October, a rise of 9% compared to the year before.
That's according to the HomeLet Rental Index, which analyses data from letting agents in the private rented sector.
The figures are once again an all-time high, with soaring rent prices breaking records month by month.
In October 2022, the average annual rent for a new tenancy in the UK (excluding London) came to £11,712. In October 2023 it was £12,816 - a £1,104 difference. Bring London into the equation, and the UK yearly average increases to £15,396.
Here, Which? examines what's happening in the rental market by region, why rent prices are going up, and what might be on the horizon for tenants.
What is the average rent in my area?
As with house prices, rental costs vary depending on where you live.
The table below shows rental price growth on newly let properties across UK regions with data from HomeLet. The table is arranged alphabetically.
| Region | Average monthly rent (Oct 2023) | Year-on-year increase |
|---|---|---|
| East of England | £1,216 | 9.8% |
| East Midlands | £869 | 9% |
| Greater London | £2,192 | 10.2% |
| North East | £677 | 8.7% |
| North West | £1,016 | 10.7% |
| Northern Ireland | £887 | 11.2% |
| Scotland | £952 | 12% |
Source: HomeLet
Some areas have seen higher increases than others. Comparing rent levels from October 2022 to October 2023, the South West has recorded the lowest price growth (5%). Scotland has seen the sharpest rise (12%).
In fact, in just a two-year period, rents for new lets in Scotland have surged by around 30%.
While HomeLet data focuses on new lets, figures from the Office for National Statistics combine prices for both new lets and existing tenancies. The latest data from October shows that rents across the UK - when pooling together new lets and existing tenancies - increased by 6.1%.
In its annual rent review, carried out in February, the ONS revealed that just over 50% of existing tenancies in England experienced a price increase in the past 12 months, compared with 36% the year before.
- Find out more: what are my rights when renting from a private landlord?
First-time renters priced out
Thousands of would-be first-time renters are opting to stay at home with their parents due to the huge cost of renting.
Research by Hamptons found that only 4.6% of new lets were taken on by first-time renters between January and May this year. In 2015, that figure was 6.1%.
Young adults are more likely to become new renters in the northern regions of England rather than the south - reflecting the big contrast in pricing.
Hamptons says the average young adult aged 18-24 currently spends 43% of their pre-tax salary on renting a single room.
- Find out more: the first steps to renting a home
Why are rental costs so high?
Rising rents have been driven by a surge in demand since the pandemic, combined with a shortage of rental homes.
The supply issue is down to a combination of factors, one of which is the growing number of landlords selling up. Increased mortgage rates and tax changes are among the reasons they cite for exiting the buy-to-let market.
High buy-to-let mortgage rates
Interest rates on buy-to-let mortgages climbed steadily throughout 2022, before surging sharply after the government's 'mini-budget' in September 2022.
They trickled down in the opening months of this year, before surging again in the summer. Rates have dropped over the past two months, but remain high. The average fixed-rate deal as of 1 November is 6.22%, according to data analyst Moneyfacts.
As landlords face higher costs when remortgaging or expanding their portfolio, they need to recoup the money from somewhere. In many cases, costs are therefore passed onto the tenant in the form of rent rises.
- Find out more: what's happening to buy-to-let mortgage rates?
Tax changes
Recent tax changes are also adding to landlords' woes. As of this April, the capital gains tax allowance has been cut from £12,300 to £6,000 - and it will be slashed to £3,000 in April 2024.
This reduces the amount of tax-free profit landlords can make when selling a property. As a result, the share of rental homes appearing in property auction catalogues more than doubled between July 2022 to January 2023, as those in the buy-to-let market looked to sell up quickly before the tax changes came into force.
Landlords are also no longer able to deduct mortgage expenses from their rental incomes to reduce their tax bills. Instead, they can get tax relief payments based on the amount of mortgage interest they pay.
- Find out more: capital gains tax on property
What will happen to rent prices in the future?
HomeLet figures show prices have been on a continued upward trajectory for the past six months, following a period of stagnation at the end of last year.
The upward pressure on rents is set to continue over the following months and years. Hamptons estate agency predicts rents will rise more than four times as fast as house prices between now and the end of 2026.
It believes tenants' bills will be 25% higher than they are now, while house prices will only have climbed by 5.5% in the same period.
Aneisha Beveridge, head of research at Hamptons, said: 'It’s hard to see any of these pressures receding any time soon, which is why we expect rents to continue rising over the next few years.'
Supply vs demand to remain an issue
Rightmove data shows that demand for rented properties is continuing to outstrip supply, and competition among tenants to find a property has doubled since 2019.
That demand is only expected to grow as an increasing number of would-be first-time buyers find themselves priced out of the housing market thanks to high mortgage rates.
A growing number of landlords are also deciding to exit the market ahead of the introduction of new legislation, further exacerbating the supply issue. Under the proposed Renters' Reform Bill, a raft of changes including increased rights for tenants to keep pets will be brought in.
A long-proposed ban on no-fault evictions has, however, been put on hold indefinitely.
What to do if you're struggling with rent payments
If you're struggling to pay your rent or have already missed a payment, it's important to contact your landlord as soon as possible.
They aren't obliged to offer support but may be willing to discuss a compromise that will enable you to keep living in the property. This could involve reducing your monthly payments for a set period of time while you get on top of your finances.
Tenants in England or Wales may be able to qualify for the Debt Respite Scheme – also known as Breathing Space. This gives you a 60-day window in which the landlord won't be able to take enforcement action.
- Find out more: what to do if you can't pay your rent
This article was first published on 5 March 2023 and has been updated since then. It was last updated on 16 November 2023, with refreshed rental figures.
