10:44 AM, 29th December 2022, About 4 weeks ago 3
The prospect for big rent rises in 2023 is slim with affordability already hitting a tenant’s ability to pay rent, one analysis reveals.
According to Zoopla, rents rose by 12.1% in 2022 but rent now accounts for 35% of a renter’s income.
In total, the property platform says that tenants spent £5.4 billion on paying rent this year.
And tenants are increasingly looking for affordable options when looking for homes to rent.
Richard Donnell, Zoopla’s director of research and insight, said: “2022 was the year that rents hit the least affordable level since we started tracking rental affordability a decade ago.
“Rents rose 12.1% over the course of the year – well ahead of earnings growth at 6% – and the average renter now puts 35% of their income towards rent.
“Unfortunately for renters, the market continues to face a chronic imbalance between supply and demand, with supply of rental homes 38% lower than the five-year average and demand 46% higher.”
He added: “Rents rose the fastest in large cities and renters increasingly sought one-bedroom flats to find better value for money.
“We expect stretched affordability to hit demand and the pace of rent increases in the first half of 2023, with rent growth slowing to 4% to 5% by the end of next year.
“Increasing investment in new rental supply from multiple sources is the main route to reducing rental growth and making for a more sustainable private rented sector.”
Zoopla has also looked at the UK’s residential housing market with an upbeat view for property prices in 2023.
Richard says: “At the start of the year, the UK housing market was still feeling the motivational impact of the pandemic on our desire to move home.
“The shock of higher mortgage rates hit buyers in October, with demand now down 50% and sales agreed down 28% compared to last year.
“But house prices rose 7.2% over the year and 1 in 14 homeowners moved house, making 2022 another strong year for the market.”
He added: “While many forecasters have made bearish predictions for 2023 – anticipating house price falls of 8% to 12% and a significant fallback in sales numbers – we’re more positive about the outlook.
“We’re anticipating 1 million housing sales in 2023, supported by more working from home, the ongoing spike in retirement and a greater consideration of home running costs.
“New mortgage rates are manageable: banks are well-capitalised and ready to lend. We expect mortgage rates to be at 4.5% to 5% in January 2023 which will add to buying costs, but not excessively.
“Overall, I think 2023 may well disprove the gloomy forecasts made when the outlook for mortgage rates looked much worse.”
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