Rental growth set to slow as affordability pressures bite

29-3-2022

The cost-of-living crisis has hit the country hard, with rental growth set to slow over the next few months.

Last year, record-breaking rental growth saw the average household in Great Britain spend 42% of their post-tax income or £13,560 on rent in 2021, the highest proportion since our records began in 2010. Private tenants spent a collective total of £62.4bn on rent last year, up from £58.2bn in 2020.

When other bills such as gas, electricity, council tax, broadband and TV licences are included, it meant that the average household spent 52% of their post-tax income on rent and bills in 2021, the highest share since 2016. Collectively, tenants paid a total of £77.8bn in rent and household bills last year, up from £73.4bn in 2020.

How much households spent on rent & bills in 2021 by region:

2021 Annual rent Annual bills* Total % post-tax income spent on rent % post-tax income spent on bills % of post-tax income spent on rent & bills
London £23,380  £2,880  £26,260 48% 6% 54%
East £13,130  £3,470  £16,600 47% 13% 60%
S. East £15,000  £3,480  £18,490 52% 12% 64%
S. West £12,220  £3,510  £15,730 46% 13% 59%
E. Midlands £8,950  £3,570  £12,530 40% 16% 56%
W.Midlands £9,580  £3,360  £12,940 41% 14% 55%
N. East £7,370  £3,000  £10,370 34% 14% 48%
N. West £8,950  £3,390  £12,340 39% 15% 54%
Y. Humber £9,400  £3,370  £12,770 41% 15% 56%
Wales £8,890  £3,400  £12,290 37% 14% 51%
Scotland £8,970  £3,570  £12,540 32% 13% 45%
GB £13,560  £ 3,350 £16,910 42% 10% 52%

Source: DCLG, ONS & Hamptons

These figures are set to surge in 2022 as the cost of living crisis deepens. By the end of this year, Hamptons, which produced this report, estimate that the average rented household will spend a record 54% of their post-tax income on rent and household bills, equating to an extra £4.6bn paid by tenants.  This will cost the average household an extra £1,008 each year with the total amount they spend on rent and bills set to rise to £17,914 per household by the end of 2022, up from £16,906 in 2021.

While the agency expects rental growth to slow to around 2.5% by the end of 2022, this will be offset by an increase in the energy cap and general price rises which could see tenants’ household bills rise by 15%, significantly outpacing earnings growth which is expected to increase to 3.75%.

Aneisha Beveridge, head of research at Hamptons, said: “Financial pressures are raining down on households, but while last year it was rental growth that ate into tenants’ incomes, this year it’s more likely to be energy costs.   Rental growth is slowing as affordability pressures bite and we expect rents across Great Britain to end the year 2.5% up on 2021, down from 7% today.  However, even if household incomes rise by the forecast 3.75%, it won’t be enough to fully offset rising utility bills and tenants, in particular, will feel the pinch.

“Rent and bills typically tend to get paid first, with whatever money is left over being saved or spent on other things. With more income tied up in essentials, it’s likely that discretionary spending is set to fall later this year which is bad news for the wider economy. And as mortgage rates creep up, homeowners are likely to face similar pressures too.”

Average rents on newly let properties:

  Feb-22 YoY Change % YoY Change £
Greater London £1,899 5.8% £104
   Inner London £2,519 17.8% £381
   Outer London £1,781 2.9% £51
East of England £1,092 5.2% £54
South East £1,201 1.5% £18
South West £1,033 13.1% £120
Midlands £786 9.5% £68
North £754 9.6% £66
Wales £744 7.2% £50
Scotland £768 12.1% £83
Great Britain £1,118 6.7% £70
Great Britain (Exc. London) £917 7.2% £62

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