Will Rents Continue to Rocket Upwards?

Published: 10/01/2023 By Allan Fuller

Will rents continue to rocket upwards?  

It is easy to forget that during the Covid lockdowns average rents dropped, last year they not only caught up but exceeded their pervious highs. This is a perfect example of a free-market economy where supply and demand levels create the value of a product.

The three sections of the residential property market in the UK are, homes privately owned, local authority/ housing association, and the PRS (Private Rented Sector).

You home is however far more than just a mere commodity; voices are often raised advocating limits on what rent can be charged. This has in the past had the effect of decimating the PRS (Private Rental Sector)because rents were pegged at such a low level the landlord could not afford the upkeep of the property. It was not until 1988 that Assured Shorthold Tenancies were created, followed a few years later with the Buy to Let Mortgages.
The effect of these two measures was the creation again of a PRS, landlords had a source of income, which raises tax revenue for the government, and tenants a choice of property to rent. Many landlords have only 1 or 2 properties and regard their investment as a secure pension in later life.
This seems to be a win-win for landlords, and tenants alike. Recently the PRS was reckoned to be 18.5 percent of the total housing stock.
There has been an increase in demand especially in London, caused by people returning after moving out during Covid restrictions, and more home working requiring greater space, at the same time there are landlords deciding to sell fearful of legislation that could reduce the viability of letting, but others turning to short term and holiday letting to increase their income. The result of these factors has been reduced supply and increased demand.