New evidence reveals the full extent of how many households in the UK are now renting, along with how much rental revenues have risen since 2012.
While the government has continued to place the onus on getting people onto the housing ladder, the number of people renting has nevertheless continued to climb over the years.
This is down to a combination of reasons such as soaring house prices and more stringent mortgage regulations, as well as a trend shift that means more households are willing to rent until later in life. The average age of a first-time buyer outside London is now 32.1.
Renting is not only a means to an end for many households, but a desirable way of having more flexibility, being able to live in an area or property that might be unaffordable to buy, and not having to worry about issues related to mortgages and homeownership.
Surge in rental numbers and revenues
The number of people renting properties privately in England and Wales has increased by 1.12m between 2012 and 2022, according to the latest findings from Hamptons.
This leap, alongside rising monthly rental prices, has led to the amount private tenants spend on rent jumping by 11.8% to a record £71.5bn in 2022, says the research. This record-breaking figure compares with the £63.9bn recorded in 2021, and £42.8bn in 2012.
The report from Hamptons finds that 54% of the decade’s growth in rental revenues was a direct result of rents rising, while 46% was due to the number of households renting in the market increasing so significantly.
Why are more people renting?
The government has brought in numerous measures to help people become homeowners, including the Help To Buy initiative, shared ownership schemes and tax cuts for first-time buyers. While this will have helped many onto the ladder, the rental market remains a vital part of the country’s housing sector.
One issue affecting the buy-to-let space in recent years has been the ongoing lack of supply in certain parts of the country in comparison to the number of people seeking property. Particularly as people tackle the cost of living crisis, more households are expected to remain renting rather than attempting to buy, meaning demand will remain high.
Aneisha Beveridge, Hamptons head of research, says: “Growth in the private rented sector over the last decade has come on the back of fewer younger people buying their own home, particularly in the less affluent areas.
“While tighter mortgage lending criteria introduced following the financial crash has reduced the number of borrowers struggling to make their mortgage payments, it has also put homeownership beyond reach for some people on below-average incomes with small deposits.”
Rent rises are behind inflation
The latest figures show that the level of inflation in the UK dipped slightly in December last year to 10.5%. Nevertheless, inflation remains high historically and it is affecting most people and many markets.
Beveridge adds: “Last year was a record-breaking year for rental growth. But even so, rents have failed to keep pace with wider inflation, and indeed landlords’ rising costs. With the cost-of-living crisis hitting tenants particularly hard, rental growth seems to have settled at a new pace, hovering around the 7% mark for the fifth consecutive month.
“While we may see the rate of growth soften a little more in the coming months, rents are still likely to rise around 5% in 2023 given the lack of homes available to rent and inflationary pressures on landlords.”
For buy-to-let landlords, rental yields are largely healthy at the moment across many parts of the country, as house prices begin to see a calmer level of growth while rental prices remain strong against the demand backdrop. This is making the sector more appealing to property investors.