The UK’s housing market in the post-pandemic period is undergoing significant shifts, affecting both homeowners and tenants in the private rental sector.
Though tales of spiralling rent and stiff competition among tenants are rife, official statistics offer a more nuanced view. The changing landscape owes its complexities to an intricate blend of supply, demand, and legislative alterations.
Contrary to stories of sky-high rents, the Office for National Statistics (ONS) data indicates a 5.1% rise in private rental costs over the past year, lagging behind the 6.9% wage growth and 7.9% inflation. However, these figures only scratch the surface. This increase is an average across existing rental stocks, while newly listed rentals show a more dramatic hike. Rightmove’s statistics reveal a staggering 9.3% surge in asking rents over the last year, and a 33% jump since the pandemic started, notably in London.
This trend is most palpable for those seeking new rentals, particularly in larger and more sought-after cities, and mirrors issues faced globally in places like the US, Canada, New Zealand, and Ireland. In the UK, regulatory changes and rising costs, such as the Renters (Reform) Bill and an increase in interest rates (from 1.8% pre-pandemic to a current 6.2% for two-year fixed-rate buy-to-let mortgages), are influencing the market and discouraging potential landlords.
Despite these deterrents, the expected exit of landlords from the market has been milder than predicted. The fast growth of buy-to-let property since 2000 has levelled off, with 19.4% of UK households now renting, a slight decline from 20%. This reduced supply coincides with buoyant demand, boosted by factors like high levels of net migration, which reached a record 606,000 in 2022, adding further pressure on the rental market.
With a contracted rental supply and burgeoning demand, it’s hardly surprising that rents are rising and living spaces are shrinking. Renters are finding it increasingly hard to meet housing costs, with the Resolution Foundation highlighting that 60% of working-age adults who rent are finding it difficult, a situation worsened for those on housing benefits.
Although some contributing factors like interest rates and migration may eventually recede, the core issue of robust demand and constrained supply persists. The unfolding scenario in the housing market necessitates inventive strategies and long-term planning to establish a more equitable and sustainable rental sector for all.
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