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April 17

Letting Agency Predicts Decrease in Tenants’ Energy Costs

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According to the latest data from lettings agency Hamptons, rental growth across Britain has shown signs of slowing down. Over the past year, the average newly let rent has experienced a modest increase of 6.7%. This growth rate, although substantial, notably lags behind the peak observed in August 2023, when rental prices surged by an impressive 12%. Despite the moderation in growth, rental prices remain notably elevated, standing at 31% higher than pre-pandemic levels.

The disparities in rental trends across regions are quite pronounced. Particularly in the North West, rental prices have seen a significant surge, now sitting at an astonishing 42% above their pre-pandemic levels. This substantial increase underscores the robust demand for rental properties in this region. On the other hand, the West Midlands has emerged as a notable hotspot, with average rents surpassing the £1,000 per month threshold. This marks the first time a region outside of the South of England has reached this milestone, highlighting the shifting dynamics in the rental market.

Despite the overall slowdown in rental growth, the West Midlands stands out as an exception, with rental increases still in double figures. This indicates sustained demand and limited availability of rental properties in the region. As rental prices continue to rise, tenants across Britain are facing increasing financial pressures, especially in regions where rental growth remains robust. These dynamics underscore the importance of understanding regional variations in the rental market and adapting strategies accordingly.

In contrast to the modest rental increase observed in Inner London, where rents rose by just 0.4% over the past 12 months, other regions experienced more substantial growth. For instance, the North West witnessed a remarkable surge, with rental prices soaring by 42% above pre-pandemic levels. Similarly, the West Midlands surpassed a significant milestone, with average rents exceeding £1,000 per month, marking the first instance outside the South of England. Notably, rent hikes in this region remain in double digits, showcasing the persistent demand for rental properties.

Hamptons’ latest findings also shed light on the mounting burden of energy costs faced by tenants, which reached a seven-year peak last month. This surge in energy prices translates to an additional month’s rent annually for tenants, posing financial challenges amidst already rising living expenses. However, there’s a glimmer of hope on the horizon, as energy prices are poised to decrease following a 12% reduction in the energy price cap this month, with further declines anticipated in June. This development offers some relief to tenants grappling with escalating utility bills.

Zooming out to a broader perspective, the rental landscape has undergone significant transformations over the past decade. Rental prices have surged by 54%, outpacing the growth in household incomes and exacerbating affordability concerns for tenants across the country. Concurrently, energy bills have also experienced a notable uptick, rising by 46% during the same period. Consequently, tenants are now bearing the brunt of nearly £5,993 more annually in combined rent and energy expenses compared to figures from a decade ago. This confluence of factors underscores the evolving challenges faced by renters in navigating the housing market and underscores the urgent need for policy interventions to address affordability issues.

“Over the past couple of years, tenants have faced significant financial strain, grappling with rising rents alongside surging energy and food costs,” explains Aneisha Beveridge, Head of Research at Hamptons. “While rent affordability is typically scrutinized during the move-in process, the recent spikes in living expenses have added to tenants’ financial burden.”

“In the immediate future, the recent decline in energy prices is likely to divert attention away from pressing housing issues,” Beveridge notes. “Consequently, it appears improbable that the current government will implement minimum Energy Performance Certificate (EPC) standards for rental properties. However, with the potential for a change in government, landlords may face renewed pressure to enhance the energy efficiency of their rental properties.”

“Despite a 30% increase in rental property listings compared to last year and a 20% decline in potential tenants, rental prices have not followed the typical trajectory of decline,” Beveridge observes. “However, this year-on-year comparison obscures the broader trend, which indicates a mismatch between dwindling supply and increasing demand in the rental market.”

“While rental growth has slowed from record levels, as more landlords roll off cheaper fixed-term deals, rents are still creeping upwards.  In most places outside central London, landlords are still achieving record rents on the back of long-term tax and interest rate pressures.”


Tags

Energy Costs UK, Energy Performance Certificate (EPC), Rent


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