Rental market cools down – and first-time renters stay at home

Rental market cools down – and first-time renters stay at home

0:02 AM, 12th June 2023, About 8 months ago

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In May, the rental market experienced a slowdown in price growth across Great Britain, research reveals.

The average rent for newly let homes increased by 9.1% year-on-year, a drop from April’s 11.1% growth.

The report from Hamptons also reveals that the slowdown was seen in every region, except the South West.

London, previously home to the fastest rise in rents, reported the most significant slowdown.

London’s average rent increased by 13.3%

The capital’s average rent increased by 13.3% year-on-year in May, a drop from the record-breaking 17.2% growth in April.

Though inner London retains its position as having the strongest growth, along with Scotland which also posted double-digit rent price growth.

Hamptons says that although rent increases are capped for existing tenancies in Scotland currently, new open-market rents continue to rise rapidly, with an 11.6% year-on-year increase.

‘Rental growth is starting to cool’

Aneisha Beveridge, the head of research at Hamptons, said: “The good news for tenants is that rental growth is starting to cool, and we expect that to continue throughout the remainder of the year.

“Average rents across Great Britain have risen 47% over the last decade, underperforming house price growth of 69% over the same period.

“However, the key issue, is that over half of that rental growth has occurred within the last four years.”

She added: “And this has come at a time when household incomes are under pressure from other rising costs.

“That said, many landlords are also facing similar pressures, and this is one of the key factors underpinning rental growth this year.”

Tenants moving out of their family homes

Hamptons also reveals that the proportion of tenants moving out of their family homes has been steadily decreasing since 2015 due to rising rents.

That’s when first-time renters accounted for 6.1% of all tenants moving into new rented homes, amounting to 71,860 households in England.

However, this number has dropped to 4.6%, or approximately 43,280 new rented households, during the first five months of 2023.

The firm says that if young adults had continued moving out at the same rate as in 2015, there would have been an additional 104,550 households seeking rental properties in England between 2016 and 2023.

‘Renters are relying on the hotel of Mum and Dad’

Ms Beveridge said: “Around 105k missing renters are relying on the hotel of Mum and Dad.

“The number of first-time renters has been steadily falling since 2015, pushed down by the spiralling cost of living and record-breaking rental growth which has stretched affordability to the edge of its limits.

“Young adults are staying at home for longer in order to save up, with some skipping the rental market entirely and going on to purchase a home instead.”

Average rent for those leaving their parental homes

Also, as the average rent for those leaving their parental homes surpasses £1,000 per month for the first time, the average potential tenant is projected to save £12,290 by living rent-free with their parents this year.

This amounts to a total savings of £1.3 billion for first-time renters.

Young adults living in the South of England are less likely to become new renters compared to those in the North.

This year, those leaving their family homes accounted for 5.4% of all renters in the North of England, while only 3.7% in the South of England.

Although the share of tenants leaving their family homes has risen in the North, affordability challenges have limited the number of potential tenants in the South of England.

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