Rental market in crisis as demand soars
New data from the leading flatshare site SpareRoom reveals that the UK rental market is in crisis, with demand for rooms at an all-time high and supply hitting a nine-year low. As a result, rents have gone up by a massive 32% in the same period with no sign they’re slowing down.
The pandemic created a huge backlog of renters, who are now flooding the market looking for properties. While this is a temporary phenomenon which will eventually ease, supply has been consistently dwindling since 2017, other than a brief spike during the pandemic as renters stayed put or moved home to live with parents. Section 24, which stopped landlords claiming tax relief on their mortgage interest, alongside a 3% stamp duty surcharge for second properties, have also made it harder for many smaller landlords to make ends meet.
- Changes to government policy/taxes – 81%
- Future changes to legislation/taxes – 75%
- Rising energy costs – 58%
- Rising interest rates – 46%
With this in mind it comes as no surprise that a third (36%) of landlords polled revealed they plan to reduce their portfolio this year and a further 16% plan to leave the rental market entirely by the end of 2022, reducing supply even further.
This is all contributing to rising rents, with the average UK room rent now at an all-time high, increasing across every UK region in Q3, with Scotland up 20%, London up 18% and Northern Ireland up 16%.
|Region||Average monthly room rent Q3 2022||Average monthly room rent Q3 2021||Annual change Q3 2022 vs Q3 2021|
|Yorkshire and Humberside||£478||£434||10%|
|UK (excl London)||£554||£501||11%|
The results reveal every one of the UK’s 50 largest towns and cities saw rents increase, with Edinburgh (+31%) seeing the biggest jump, due in large part to rents increasing during the Edinburgh Festival. Sunderland (+22%) and Glasgow (+21%) also saw high rent increases from Q3 2021 to Q3 2022. Many the UK’s biggest towns/cities saw rents hit record highs again in Q3 2022, including London with an average monthly room rent up 18% from £729 to £857 – the combined effect is a market that’s incredibly difficult for tenants.
A recent SpareRoom poll also revealed two out of five (40%) renters have had to pay over the advertised price for their current room, rising to nearly half (47%) for London renters. The main reason given was that the landlord put the rent up (60%) followed by over a third (37%) saying they ended up in a bidding war. In order to secure their rental nearly half (47%) of renters surveyed said they had to decide on the room at the viewing, 20% had to pay several months’ rent up front and 12% paid a deposit before viewing the property.
Matt Hutchinson, SpareRoom director, comments: “We’ve been running flatshare sites for over 20 years and we’ve never seen the market like this. The spike in demand will ease over time, but the real worry is the continued drop in supply. Landlords are leaving the market in alarming numbers and renters are facing an incredibly tough time. The government has decided growth and jobs are their focus. But jobs are no use if people can’t move to take them.
One silver lining is that homeowners are starting to look at renting out their spare rooms to make a little extra cash and help with the cost-of-living crisis. That could provide much needed supply far quicker than anything government can do and will bring rents down, whilst helping struggling homeowners too.”