The Hamptons Lettings index has reported that the United Kingdom has witnessed a remarkable surge in the annual rental growth rate for newly let properties, reaching an astonishing 12.0 percent in the month of August. This milestone marks the fastest pace of growth since the index’s inception back in 2014.
This noteworthy development signifies a rare occurrence, with only the fifth month in over a decade seeing annual rental growth soaring into double digits. More notably, four of these occurrences transpired within the last year alone.
August’s exponential growth has outpaced the previous record set in May 2022, which stood at an impressive 11.5 percent. As a result, new tenants are now shelling out an average of £140 more per month compared to the same period last year.
Surpassing significant milestones, the average rent in Britain recently crossed the £1,300 per calendar month (pcm) mark for the first time, merely 11 months after surpassing the £1,200 mark and a mere 37 months since it last crossed the £1,000 pcm threshold. This meteoric rise has left rents a staggering 29 percent or £296 per month higher than the levels observed in January 2020, just before the onset of the pandemic.
An eye-catching statistic reveals that a substantial 68 percent of the rental growth over the past decade has materialized in the months following the advent of Covid-19. As a result, the average monthly rent for a newly let home now stands at an astonishing £436 higher than it did in August 2013.
Despite the astonishing growth, experts at Hamptons assert that if the annual rental growth rate persists at the current pace of 12.0 percent, it would take a tad under four years for the average monthly rent in Great Britain to surge past the £2,000 pcm mark. However, in stark contrast, if rents were to rise at the pre-Covid average of 2.0 percent observed between 2016 and 2019, it would require a protracted 29 years to reach the same milestone.
In the last 12 months, the capital city, London, has led the charge in annual rental growth, with rents surging by a staggering 17.1 percent year-on-year. This figure is only marginally lower than the previous record of 17.2 percent established back in April. The capital’s dominance in annual growth can be attributed to the fact that rents plummeted more significantly during the pandemic, and they are now on a vigorous path to recovery.
As a result, London has witnessed double-digit growth in rents for a remarkable 16 out of the past 18 months, translating to an additional annual expense of £5,508 for the average tenant compared to March 2022. Notably, Outer London has led the rental growth charge since January 2020, boasting a 30 percent increase in rents compared to pre-Covid levels, while Inner London has witnessed a respectable 17 percent surge.
Aneisha Beveridge, the Head of Research at Hamptons, weighed in on the unprecedented rental market trends, stating, “Each passing month has ushered in a new rental market record. Rents have risen more in the last 12 months than they did between 2015 and 2019. While the current pace of rental growth is unsustainable long term, many mortgaged landlords are being squeezed just as tightly as tenants. Higher rents are only going some way towards helping mortgaged landlords balance their books, rather than boosting their profit. This is one of the reasons we haven’t seen large numbers of new landlords come into the market.”
Beveridge continued, “The fallout from higher mortgage rates continues to buffer the rental market. Higher interest rates have encouraged some leveraged landlords to conserve cash and invest beyond bricks and mortar. With the Bank of England raising rates to encourage debt repayment instead of additional borrowing, the 30,000+ fall in the number of outstanding UK buy-to-let mortgages since November shows landlords are playing ball. However, it’s a mixed blessing for tenants. With most mortgages repaid by the sale of the home, renters are being short-changed. And this is adding fuel to the rental market.”
In light of these unprecedented developments, both tenants and landlords find themselves navigating uncharted waters, as the rental landscape in Britain continues to evolve at an unprecedented pace.