Why is Rent Rising?
Rent in London increased by 5.8% in 2021 and is expected to go up 1% again in 2022.
It won’t shock you to hear that London is the most expensive place to rent in the UK, with the average rental household spending a whopping £23,380 on rent every year. Once you add bills on top, the average London renter is spending over half of their income on basic necessities.
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With the cost-of-living on an upward trajectory, it’s likely that renters will be spending even more in the months to come.
Has rent gone up elsewhere in the country?
Rents are rising across the country at the fastest rate in five years. While the rise wasn’t as steep as in London – a 2% increase in 2021 compared to the capital’s 5.8% – this is the largest annual increase since 2017, according to the Office for National Statistics.
While London tops the charts for most expensive place to rent in the UK, areas like Surrey and Oxford aren’t far behind. Areas around London are likely climbing because of their transport links into the capital, with properties snapped up by those who can no longer afford to live in the city itself.
But there are rental bargains to be had in places like Country Durham, Derbyshire and certain areas of Yorkshire, which is something to consider if you no longer have to worry about going into the office. You could save a lot of money – and gain some great views! – by moving into the country.
It is also worth noting that rent cannot be increased often:
- Periodic Tenancy. If you rent on a week-by-weeky or month-by-month basis, you cannot increase the rent more than once a year without your tenant’s agreement
- Fixed Term Tenancy. You can increase the rent if your tenant agrees, otherwise you can only increase the rent when the fixed term expires
Why is rent so high?
It’s a combination of things and, while no one wants to hear the word ‘pandemic’ ever again, it has played a big part:
- Low supply and increase in demand. After the mass exodus from the cities during lockdown, there was a huge surge as people flocked back to offices and needed homes
- Competition. Popular areas sold out quickly, forcing people to explore locations they might not have otherwise considered, pushing prices up elsewhere as tenants competed for the second – or even third – best location
- Landlord nerves. Many landlords were stung hard by the pandemic, as tenants left or were unable to make rent, so have increased rents as a protective measure
While there is some uproar around rising rents, it’s worth remembering that most landlords don’t increase the rent for the sake of it. There are a lot of costs involved with being a landlord, but it’s important to consider other ways to protect yourself that don’t rely on increased rent, as rising rents can eventually have a negative impact:
- Tenants can’t afford to pay. You may find it harder to find the right tenant, as they are unable to afford your property
- High turnover. You may find that you’re looking for tenants more often as they realise the combination of rent, bills and shopping is too much for them and they look for somewhere cheaper elsewhere
- Cost-of-living. This phrase is becoming the new ‘pandemic’ but it’s something to consider as the rising costs of bills – with another rise due in the autumn – along with increases in the price of food and other essentials, could see your tenant rapidly losing control of their budget
So where does this leave landlords?
A rent increase alongside inflation is reasonable and understandable, but there are other ways to protect your investment:
- Rent Guarantee Insurance. We advise getting RGI ahead of the next energy increase towards the end of the year. Then you are prepared if your tenant finds themselves struggling to balance bills with rent
- Home Emergency Insurance. You should save where you can, but Home Emergency Insurance is not a cut you should ever make. Without it, you would be liable for any emergencies in the property which can be costly, due to emergency call out charges and any large fixes required to make the property safe. Make sure you’re covered so you’re not raiding your savings later
- Tenant Referencing. Do your due diligence up front to make sure you have the right tenant so there are no nasty surprises later
- Save where you can. While we don’t recommend cutting insurance, you can save on your tenant find and rent collection with Mashroom because we offer all that for free
- Get money savvy. If you’re a landlord, you’re probably already on top of your expenses, but just in case, take some time to check in on a regular basis. Our free Expense Tracker makes this really easy, so you can see where you’re spending and where you could save. It makes tax time easier too!
Ultimately, everyone is feeling the pinch at the moment and we all need to do what we can to protect ourselves and each other to get through this crisis.