Renters Have Their Eyes On Smaller Homes
The cost of living crisis is beginning to really affect where and how we live. Rents are rising, and energy bills are pushing renters to make difficult choices about their homes. In addition, mortgages are becoming more expensive, and landlords are understandably passing rising costs onto tenants.
Data from Zoopla shows that renters are beginning to look for cheaper and smaller homes to reduce rental outgoings. On top of that, the threat of rising bills mean the costs of heating homes throughout the winter is a serious concern.
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Smaller flats are more energy efficient
Renters are shifting their focus from three-bed houses to two-bed flats. It’s a trend that is steadily growing, and for good reasons.
The energy needed to warm a purpose-built flat is around 40% less than the energy required to heat a three-bed terraced house and 25% less than heating a flat conversion.
A one-bed home of any kind requires less than half the gas that’s needed for a three-bed home. There has been a steep decline in renters looking for two and three-bedroom houses and a rise in demand for one and two-bed flats.
In winter 2023, with the energy price cap uncertain, many people will likely need energy-efficient homes.
Rents are rising fast, and two-bed flats are cheaper
London has always been the UK’s most expensive place to rent a home, with rents increasing by about 18% on average in the last year. Rents did fall by 10% during the lockdown, and many tenants moved during that time. As a result, the current increase is making people’s homes that bit more unaffordable.
Rents in London are up 7.8% compared to pre-pandemic levels. In the rest of the UK, rents have risen by a considerable 13% on average.
The rising cost of renting is having a massive impact on where people can live. Outside of London, the current difference in rents charged for a two-bed flat and a three-bed house is £105 per month. This is a £1260 saving per-year.
The average rent has increased by £115 per month since September 2021. Some publications are reporting increases way in excess of that. Unfortunately, average earnings aren’t rising at anywhere near the same rate, and there is a severe shortage of available and suitable homes for people.
There’s less than half the number of homes seen on the market in the past five years
Increasing taxes and regulations are leading landlords to sell their properties.
Landlords that have good tenants are more likely to be more open to negotiation on rent increases. As a result, more tenants are staying put and not risking higher prices on the market. With an insufficient number of properties entering the rental market to meet demand, landlords hold a strong position when it comes to setting prices. In a time when more rental homes than ever are needed, there are fewer than ever before.
The prospect for renters in 2023 and beyond
In Northern England and the Midlands, rents are cheaper and more tenants reported rent increases being manageable. However, in the south of England, more people have reported that rent was becoming unmanageably high.
Unfortunately, the answer to the question ‘how much more will rent increase?’ is difficult to determine. If landlords can’t make a profit on reasonable rents because of rising costs and mortgage increases , then the most likely outcome is a decrease in housing supply. This isn’t good news for anyone.
The average renter moves every four years, and price increases mainly reflect new lettings. As we’ve said above, landlords with good tenants are likely to be more lenient with price increases, especially if they have a personal relationship.
As costs for landlords increase, even goodwill between landlords and tenants may not be enough. Tenants moving into a newly rented property will find the cost of renting 12.3% higher, as houses coming onto the market now are priced in line with the low supply, high demand of housing across the UK plus dramatically increased interest rates.
