Growth mainly due to more households renting and rental hikes
Tenants across Great Britain are on track to pay a record £85.6 billion in rent this year, reflecting a significant increase from the previous year’s £77.6 billion, according to residential estate agent Hamptons.
The £8 billion jump marks the most substantial annual jump on record, with the increase attributed to a 25% growth in the number of households renting, along with rising rental rates since 2010.
The average rent for a newly leased property in Great Britain reached £1,348 per calendar month in November, exhibiting a 10.2% rise or £125 more compared to the same month in the previous year, according to the latest Hamptons Monthly Lettings Index. This marks the seventh instance of double-digit increases over the past 12 months, representing the highest annual growth rate recorded in any November since Hamptons’ records began in 2014.
“Tenants across Great Britain paid a record £85.6 billion in rent in 2023, equivalent to the total value of all homes sold in London last year,” commented Aneisha Beveridge (pictured), head of research at Hamptons. “While over the last 12 months, the rent bill has increased because of record-breaking rental growth, longer-term it’s mostly risen as a result of more households renting.”
Which age groups contribute the most in this rental growth?
Millennials – those born between 1980 and 1994 – remain prominent in the rental market, contributing a record £36.9 billion to rent payments this year. This contrasts with the decline observed from 2016 to 2020 when more millennials transitioned to homeownership.
In 2016, millennials constituted a record 58% of all rented households, which then dropped to a low of 42% in 2021, only to rise again to 44% in 2023. The sustained rental growth post-COVID, coupled with elevated mortgage rates, has extended the renting period of the tail end of millennials renting, increasing their overall rent expenditure.
Simultaneously, Generation Z – those born from 1995 to 2012 – is increasingly becoming renters, spending £30.5 billion on rent in 2023, £6.3 billion more than in 2022. They constituted 36% of all renters this year, a stark rise from 1% a decade ago.
All other older generations saw a marginal decrease in their rent bill in 2023, due to a small number transitioning to homeownership in their later years rather than a reduction in monthly rent payments.
Rents in London continue to rise
According to Hamptons, London experienced the most robust rental growth over the past year, with the average rent reaching £2,425 per calendar month — a surge of 11.8% or £255 more than in November 2022.
Consequently, tenants in the capital paid a record £32.1 billion in rent this year, surpassing the figures from 2022 and a decade ago. London’s total rent bill now exceeds the combined bills of the North of England, Midlands, Wales, and Scotland, amounting to £29.4 billion.
The growth in rentals in London remains driven by Inner London, where rents on new tenancies increased by 13.2% last month. Outside the capital, the Midlands surpassed Scotland as the second-fastest region for rental growth last month, with a 10.9% year-on-year increase.
Nevertheless, rental growth across Great Britain showed signs of slight moderation from its peak of 12% in August. Seven of the 11 regions in Great Britain experienced a slowdown in the pace of rental growth last month.
Notably, Scotland and the South East witnessed the most significant monthly deceleration. However, Hamptons said the rental growth has not decelerated as much as anticipated, considering the rising costs for landlords and the shortage of available rental properties.
Beveridge added: “Higher interest rates in the medium term are likely to mean more millennials rent for longer. This is why the millennial rent bill has risen over the last few years, at a time when it might have been expected to fall. With the rate at which millennials climb onto the housing ladder slowing, they’re starting their own families and renting larger, more expensive homes which is pushing up the amount of rent they pay.
“This also means that while Gen Zs are set to start paying more rent than millennials in the next couple of years, that crossover is likely to come later and at a higher point. And given that it gets progressively harder to get onto the housing ladder later in life, an era of higher rates will likely mean that more millennials will be renting for the rest of their lives.”
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, Twitter, and LinkedIn.
