Is rising inflation impacting UK rental market?

Is rising inflation impacting UK rental market?

Inflation And Housing Market 2022

Wars, economic woes, and political instability have all had a role in pushing inflation to historic levels. Not to mention energy issues and disease have also made landlords worry about profitability.

But what seems to balance these rising costs out is the fact that the supply of rental homes is lower than normal. This tends to drive up the rental prices significantly.

If the supply overcomes the demand, then you will see a drop in rental prices in the UK, and that may be worse for estate investors than inflation.

Rising Rents UK

There has been a trend in rising rents in the UK, but outside of London, they seem to have spiked, and there may be a downward trend. However, within London, the trend may be pointing to higher rents.

In March, the average rental price was 2.4% higher than a year earlier. There does not seem to be a change in that trend at this time. There is still a high demand for affordable housing but not enough supply to meet the demand.

It is a buyer’s market when selling a home, and it is still a landlord’s market when it comes to renting. Then the location of those rental homes plays a significant role in rising rents in the UK.

For example, London may have only increased a little bit, but other areas like Northern Ireland have increased by 6.5%. Wales increased by 1.5% approx over the past 12 months.

Why Is There UK Rental Inflation

There are several reasons why rents are rising. It is not just the typical influences like politics, conflict, and energy problems. However, those may be the underlying factors in some higher costs.

But rents are also influenced by the expenses the landlord has when it comes to taking care of their property. Here are a few of those expenses:

1. Maintenance Costs- It takes money to keep a home in shape, especially when tenants do not look after the property. Maintenance costs are predicted to go up by 20 to 50% or more in the coming months.

2. Property Costs- Landlords certainly do not get their homes for free. They have to pay the current market value for their homes. Recently, property values have risen so much that landlords can’t help but raise their rental fees.

3. Cost Of Living Issues- Some landlords feel obligated to help their tenants when life just takes a turn for the worse. They may freeze rents for a while, or they make energy upgrades to cut their tenant’s energy costs. Those upgrades are not usually cheap either.

All of these factors play a role in seeing rental rates rise in the country.

What Is Rental Inflation?

As you know, regular inflation is when consumer products and services keep getting more expensive. The manufacturers or service providers have rising costs, so they pass those costs on to their customers.

When those costs go down, so do the prices, and inflation is said to be defeated. The same principle applies to property rent. When the costs of the landlord increase, then they have no choice but to raise the rents they are charging their tenants.

Landlord costs can come from just about any sector of life as they have to paint, do plumbing, and heating repairs, repair broken items, and so on. When the prices of the repairmen and materials rise, so do the expenses of the landlord.

Those costs have to be paid, and the money has to come from somewhere. The source of that money is usually the rental fee. So those fees go up in order for the landlord to make a little profit from their investment.

Another factor that explains rental inflation is the tried and true barometer of supply and demand. This element is always present, and when the demand outpaces the supply, then landlords can name their price, within reason, of course.

Until the supply of rental homes is greater than the demand, you may not see lower rents for some time. There are landlords downsizing their portfolios due to the rising costs. This action means there may be fewer rental homes available in the coming months.

Another Reason For Rising Rents UK

Inflation, in general, makes it harder for landlords to get mortgages. Lenders become stricter with their requirements as they want to make sure the borrower has the means to repay the loan.

Rising prices put a dent in the borrower’s ability to repay any loan. Thus mortgage lenders tend to take a hard line when it comes to lending out money. The harder it is to get a mortgage loan or the higher their mortgage payment, the higher the rent will be.

This does reflect on the buy-to-let market as those landlords and homeowners must pay higher interest rates as well as monthly payments. You may see fewer buy-to-rent options as landlords are thinking of divesting their portfolios of some of their rental properties.

There is less headache in selling a home than letting it out to tenants. With fewer homes available to let, the demand will get greater while the supply shrinks even further.

Some Final Words

Inflation can play havoc with landlords and tenants. As both groups work to keep costs down, that is not always possible. That situation then turns into rental inflation, which makes life a little tougher for tenants.

However, there is an answer. All you need to do, whether you are a landlord wanting to let their property or a tenant looking for a home, is just give our office a call.

We have over 10 years of experience in the estate buying, selling, and letting business. Our knowledge and experience can help you find an affordable home to rent or sell your current rental property. We can also help you find a great home to buy.

When you want to fight back against inflation, then call us. We can help you overcome this issue. Call us today to see what we can do for you.