Uk Rent Costs Soar Further

The average UK tenant now spends over 28% of their pre-tax income on rent, the highest in the past 10 years, according to data from property portal Zoopla. Average rents for new leases have also increased by 10.4% in a year as the data revealed that rental affordability is at its worst for 10 years across seven of the 12 regions in the UK.

The shortage of rental properties continues to be a main contributor to the rising costs of average rents. There are significantly fewer homes available for rent compared to pre-pandemic levels, while the number of tenants has increased.

According to Zoopla, there are 20% to 40% fewer homes to rent in most regions of the UK than there were before the pandemic. The supply-demand imbalance is expected to intensify during the summer months when demand traditionally rises. According to Smart Move, landlords receive a 51% increase of applications in summer versus winter.

Landlords are also grappling with their lowest profits in 16 years, largely attributed to the continuous rise in interest rates and increased mortgage costs. Estate agency Savills has revealed that due to the Bank of England's base rate increasing 12 consecutive times, mortgage costs have elevated and subsequently squeezed landlords' income.

In the first quarter of 2023, net profits for buy-to-let investors plummeted to less than 4%, marking the lowest figures seen since 2007. Data from Cornerstone Tax 2020 highlights the problems which landlords are facing as just 1-in-5 (20%) say their investment has been a profitable one, with a further 1-in-5 admitting that they have lost thousands (20%). The exodus of Landlords is further fuelling the demand and supply issues.