Private tenants are now spending more of their wages on rent than at any other point over the last 10 years.
According to data provided by Zoopla, the average UK tenant is paying 28.3% of their pay, before tax, on their rent alone.
Average rents for new lets have also ,increased, rising 10.4% in a year making it harder for people to afford properties.
Richard Donnell, executive director at Zoopla, said there was signs of financial stress for tenants, particularly those on low incomes.
“Renters continue to face a relentless increase in rents, compounding wider cost of living pressures and making home moving decisions ever more challenging, especially for singles and those on lower incomes,” he said.
Rents have been growing faster than wages in the UK for 21 months, according to the data, with renting in London still by far the most expensive of all regions, at an average of 40% of gross earnings, although this is still below the peak of 43% reached in September 2015.
The property portals says that rental affordability is currently at its worst for a decade in seven of the 12 regions of the UK, with Edinburgh the highest (13.7%) as far as cities are concerned, followed by Manchester (13%), Glasgow (12.3%) and Southampton (10.7%).
Zoopla anticipates rental growth to slow towards 8% by the end of the year, but this is likely to still be above earnings growth.
With the supply-demand imbalance unlikely to narrow anytime soon, rents are expected to continue rising, especially if landlords continue selling up at the existing rate.
Zoopla’s sales data continues to show a steady, constant flow of private landlords selling up – although this has been the case since 2018 and the trend is not accelerating.
The data also shows that due to continued new investment in rented homes through mainly corporate landlords and institutional investors – there has been no change in the number of privately rented homes since 2016
Currently, one in 10 homes for sale on Zoopla are formerly rented out, however, the 20 – 30% of landlords with mortgages are being impacted by higher borrowing costs
These pressures are particularly concentrated in London and the South East which accounts for half – 51% – of landlord sales nationally.
Richard Donnell, executive director at Zoopla, said: “Renters continue to face a relentless increase in rents, compounding wider cost of living pressures and making home moving decisions ever more challenging, especially for singles and those on lower incomes.
“The chronic imbalance between supply and demand continues to push rents higher but we expect increasingly stretched affordability will start to reduce the pace of rental growth into 2024.
“While there is concern over the impact of higher mortgage rates on those with mortgages, renters have already seen a £2,820 a year increase in rental costs over the last 5 years. Some renters are experiencing more stress from higher rents with a jump in those finding the rent difficult to pay.
“A proportion of landlords continue to sell but talk of an exodus is overstated. The real pressure of higher mortgage rates on landlords hits the 20-30% with the highest loan to value mortgages where landlords may need to inject extra capital when they refinance or look to sell. Half of all landlord sales are in London and the South East where yields are lowest and the economics of being a landlord are toughest.”
Anyone spending 28% or even 40% of their income on putting a safe and secure roof over the head, doesn’t sound prohibitive.
They need to understand that many landlords will actually be paying more than 100% of their income from rental on their mortgage, for their tenants’ benefit. Also, homeowners are seeing massive increases, and those coming off fixed rates will see payments actually exceeding their income.
Now, who’s better off; renters or mortgage payers?
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Misery, misery for all. Tenants are struggling to keep pace with the hikes, many more are left behind (homeless?). Landlords are hit with devastating costly legislation now or in the very near future (EPC’s for example) with rising BTL rates eroding income and increasing tenants arrears…. is it worth my while to continue?
At the end of the day, there is only so much a tenant can afford, no matter what the demand is and it is out of control, or is it?
We see many over priced asking prices by landlords/agents, often staying vacant and more than a few tenants entering into risky affordability. But in the main, existing tenants are not being hit with the boom. Landlords preferring to take a more sensible approach that match the type of tenant they want and wish to retain, many have been with them for years providing a stable and reliable income and living standards. Often we hear landlords say they are sympathetic to affordability for their tenant and prefer to keep what they know, than end up with someone prepared to pay more, they have no history, falling into arrears and worse still wrecking the property.
All governments need PRS. An alarmingly higher percentage of the public today need PRS. When will those in power stop demonising the hand that bails them out. All government have been more than happy to bail out other industries but not PRS.
Simple maths test for landlords and agents. A starting point on tenants affordability is to multiply income by 35 = starting point for affordable rent but you still have to do all the other maths that comes with referencing to get a pass.
Affordable rent should not in any way be capped by government, that will doom PRS which obviously would be counter-productive.
What needs to be done is Affordability must be proven just as it is if the tenants were getting a loan and regulated in the same way as FCA does. If you can’t afford the rent, you shouldn’t be in PRS because you are going to cause yourself and children misery. if you are renting to a tenant that cannot afford the rent from the beginning …. what do you expect will happen!!!!!!! so why do it?
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