Rents charged ahead in 2022
The rate of rent increases in 2022 were at the highest level for the last decade. In December, the UK average rent was £1,118 which is 11.5% or £120 higher than a year ago.
Yet, the pace at which rents are increasing has slowed since peaking in July 2022 when rents were growing by 12.1%.
This growth in rents for new lets reflects the experience of a quarter of all renters who move each year.
For those staying put, the pace of rental increases is slower. Data from the Office for National Statistics on all private rented homes shows an average increase of 4.2%.
|Region||Average monthly rent||Annual rental growth (%)||Annual rental growth (£)|
|Yorkshire and the Humber||£743||9.1%||£60|
What’s causing rents to increase?
There isn’t a single answer to this question as the pace at which rental values rise depends on a combination of different national and local factors.
In 2022 we saw a chronic imbalance between the supply of homes to rent and the level of demand from renters. This encouraged competition between renters and gave rise to sizeable rent hikes.
High inflation, high employment and strong wage growth in recent years are additional drivers of rental growth, especially in urban centres.
Rents in inner London grew faster than anywhere else in the country
As London continues to recover from the pandemic slowdown, the capital is the region with the highest annual rental growth in the UK. In the last 12 months, the average rent for a new let increased by 16.1%, adding £270 to the average monthly rent.
High levels of demand in inner London are behind record-high rental growth, where rents went up by 17.4% on average in contrast to 13.3% in outer London.
The London Borough of Newham had the highest rate of rental increase anywhere in the country. In 2022, the average rent there increased by 21.2% or £320.
Popularity amongst professionals and students, regeneration projects delivering more newly-built stock of homes to rent and new connections with central London drive rental growth in this area.
In contrast, Havering - a leafier borough further east - saw the lowest level of rental growth in London as renters' preferences changed in favour of inner cities. Rents in this area increased by ‘only’ 9.2% last year, adding £120 to the average monthly rent.
Renters in cities saw the highest price increases
|City||Average monthly rent||Annual rental growth (%)||Annual rental growth (£)|
High levels of rental inflation are not exclusive to the capital.
Manchester and some Scottish cities have also been affected by the record-high increases in prices of new lets.
In Manchester, the average rent is now £977 per month, up from £847 in December 2021. Rents in inner Manchester, Trafford and Salford are growing at the fastest rate in the North of England. In all three areas, the average new rent is now £140 higher than a year ago.
Our data also shows very high rental growth in the Scottish cities of Glasgow (13.7%), Edinburgh (+12.7%) and Dundee (12.6%). This above-average level of price increases for new lets is driven by a growing gap between demand from renters and the supply of homes to let in these cities.
What’s the outlook for the rental market in 2023?
We expect rents to continue to increase albeit at a slower rate in 2023. Supply will remain tight due to lower levels of new investment by landlords. A strong labour market and higher borrowing costs for home buyers will continue to stimulate demand for rented homes.
Fixing supply issues will take a long time and a larger renting budget is not an answer for everyone. Renters in the market for rental homes need to prepare for a greater set of compromises. Searching for smaller properties, an alternative location or modest features are common tactics.
However, steep rental growth is not sustainable in the longer term. Affordability pressures will start to limit the upward pressure on rents and so we expect rental growth to slow down in 2023 towards a national average of 5%.