Rental costs across Britain soared to a record high in August as limited supply bolstered monthly payments, new data reveals.
Advertised average monthly rental payments climbed to an average of £1,577 last month – 2.9 per cent higher than this time last year, according to property portal Rightmove.
Demand from tenants has cooled, Rightmove says, but plummeting supply is pushing up rents as competition for available properties heats up.
Landlords have exited the sector in droves in the past year as making a profit from a buy-to-let investment becomes increasingly untenable.
Property investors were slapped with a second-home surcharge on stamp-duty is last year’s Budget which added thousands of pounds to their house buying bill overnight.
Rising: The cost of rent has hit a record high and is nearing £1,600 per month
Landlords will soon also need to shell out potentially tens of thousands of pounds to bring the Energy Performance Certificate (EPC) in their properties to a C band.
And while mortgage rates are now slowly falling, they are far higher than their ultra-low levels just a few levels, with landlords paying higher rates than those offered to residential homeowners.
As a result, many landlords have rethought their investments amid slimming yields and increasing red tape.
It means there’s been a squeeze on rental supply as landlords exit the sector, which has pushed up prices as the majority of tenants don’t have funds for a house deposit.
This surge in rental costs to their highest ever level is being driven largely by properties in the North West, where average advertised rents are now £1,278 – a 9.7 per cent hike in just one year.
The North East saw the lowest monthly rental costs – in August it was an average of just £918 – the only region in Britian where monthly payments are under £1,000. Rents here also saw strong annual growth at 2.9 per cent.
The region with the highest average rent was London where monthly costs are £2,699. However, the capital saw the lowest yearly increase in payments at 2 per cent.
The rest of the South East also had low growth at 2.4 per cent to £1,828 while in the South West it was lower still at 2.1 per cent to £1,461.
Renters in Wales can expect to pay £1,107 a month while in Scotland it’s £1,441 and in the East of England it’s £1,599.
In Yorkshire and the Humber costs were £1,051, £1,196 in the West Midlands and £1,134 in the East Midlands.
Rental stock across Britain is 27 per cent lower than it was in 2019.
But there have been some short-term improvements.
In the year to August, the number of homes available to rent increased by 8 per cent but that’s the lowest this figure has been all year.
It comes ahead of the Autumn Budget, where it is expected a fresh assault on landlords will be launched by Chancellor Rachel Reeves.
The Treasury is understood to be considering a new tax on the rent landlords receive from tenants.
National Insurance could soon be applicable to rental income in a bid to pull in around £2billion into the Exchequer’s coffers.
And combined with the Renter’s Rights Bill, which is expected to become law this autumn, the rental market is set to become even more squeezed in the coming year.
The Bill includes measures designed to protect tenants such as abolishing no-fault evictions, apply a decent homes standard to privately rented properties and give renter’s stronger rights to request a pet in the property among others.
But the swathes of new rules have left a bad taste in many property investors’ mouths.
Rightmove found one in three landlords are considering selling up – and some 66 per cent feel unsupported by the Government.
Legislative changes such as new taxation and regulation topped the list of landlord frustrations (68 per cent), which is driving some to plan on decreasing their property portfolio in the next 12 months.
Just 20 per cent of property investors are looking to increase their portfolio over the next year – around half are planning to maintain their portfolio size.
It’s a worrying thought for the 4.6 million households which privately rent across the country, many of which have been frozen out of homeownership due to soaring mortgage costs and sky-high house prices so have no choice but to rent.
If the number of homes for rent become more constrained, it could push up monthly payments.
Colleen Babcock, property expert at Rightmove says: ‘There are challenges for both tenants and landlords in the current market.
‘While tenants looking to move have more choice and less competition from other tenants compared with a few years ago, some may still find their options limited with rents at record levels.
‘Meanwhile, landlords are bracing for big legislative changes in the Renters’ Rights Bill, and the rumoured tax changes have added an element of uncertainty heading into the autumn.
‘Landlords provide vital homes to tenants and have already faced an increase in taxation through stamp duty changes.
‘It is essential that it remains attractive and viable to be a landlord so that tenants have comfortable places to live. If more landlords are driven out of the sector by more and more taxation, it will be tenants who lose out in the long run.’
Fresh data from flat share platform SpareRoom released this week revealed the hottest rental spots are no longer in city centres but instead in the suburbs as tenants look to escape soaring monthly costs.
North West spots including towns near Manchester and Liverpool are in high demand with as many as nearly nine renters searching for each available room in some spots.
Sale, which is just 30-minute drive from Manchester city centre, is the most in demand rental spot in the country.
Trendy spots such as the Northern Quarter and Ancoats have been snubbed by renters in favour of Greater Manchester suburbia.
Some 8.9 potential tenants were hunting for every available room in the town between April and June this year, SpareRoom says.
Rental costs are now £637 a month for a room in shared property.
While Sale has long been a popular spot – with nine people searching per room in the same period in 2019 – Oldbury has seen a huge surge in popularity.
It is second on the list of the most stretched rental markets in the country as between April and June there were some 8.8 potential renters per room, up from just 3.9 in the same time period in 2019.
Oldbury, between Dudley and Birmingham, is perfect for commuters into the second city or other spots in the West Midlands.
Are you a landlord who has sold up recently, or is planning to soon? Get in touch: editor@thisismoney.co.uk
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