Renters in the UK paid a record £85.6bn in rent this year - an increase of £8.0bn from 2022, the biggest annual rise on record, research reveals.
According to Hamptons, the rent bill in 2023 is more than double the amount paid in 2010 (£40.3bn), due to a 25% or 1.1m rise in the number of households renting and rents rising significantly.
The average rent on a new tenancy was £1,348 in November, up 10.2% or £125 per month from the same month last year.
This was the seventh consecutive month of double-digit growth and the strongest annual rate of growth for any November since Hamptons' records began in 2014.
Rental market was dominated by Millennials
The rental market was dominated by Millennials (born 1980-1994) spending a record £36.9bn this year on rent – reversing the trend of rent spending falling between 2016 and 2020, when more of them became homeowners.
Millennials accounted for a record 58% of all rented households, in 2016, but that figure dropped in 2021 to a low of 42% before increasing to 44% this year.
Hamptons says Covid led to strong rent rises which, along with higher mortgage rates, is keeping Millennials in the private rented sector for longer.
Hamptons point out that if mortgage rates had remained low, the Millennial rent bill would have seen more of them move into home ownership and rents show a steady decline from 2020.
However, the average age of a Millennial is 35 and Hamptons says that those who haven’t bought a home already are now looking at renting into retirement.
More Generation Z became renters
Meanwhile, as Generation Z (born 1995-2012) are now leaving home, more are becoming renters and they spent £30.5bn renting this year, up £6.3bn from last year.
It is also the largest annual rent rise of any generation, and this cohort now makes up 36% of all tenants, a rise from 1% a decade ago.
Three groups - Generation X (born 1965-1979), Baby Boomers (born 1946-1964) and the Silent Generation (born 1925-1945) - saw their rent bill drop this year, led by a small number who bought homes rather than paying a lower rent.
Strongest rental growth over the last year
London has seen the strongest rent growth with the average rent now £2,425 – an 11.8% or £255 per month rise on November last year.
That means tenants in the capital have splashed out a record £32.1bn in rent in 2023 – last year it was £28.7bn in 2022 and 10 years ago it was £17.5bn.
London’s rent bill is now bigger than the total for North of England, Scotland, the Midlands and Wales (£29.4bn).
However, London’s rent prices are being driven by tenants in Inner London where rents rose by 13.2% on new tenancies last month.
Fastest region for rental growth
The Midlands has overtaken Scotland as the second fastest region for rent rises at 10.9%, and rents across the country have cooled from the 12% peak seen in August.
Hamptons says that seven of the 11 regions it monitors have seen rent growth slow with Scotland and the South East seeing the biggest slowdowns.
Despite this, rent growth didn’t fall as quickly as was predicted by Hamptons as landlord costs rose and the market saw fewer homes to rent.
‘The continued rise of the private rented sector’
Simon Thompson, the managing director Accommodation for Students, said: “These are interesting figures from Hamptons and show the continued rise of the private rented sector.
“There should be no surprise that London has a huge market – but perhaps the market equalling such a large part of the country will surprise some.
“And for landlords in Scotland, the rent cap means that many landlords are increasing rents for new tenancies which explains the rapid rise there.”
He added: “However, I would say that landlords will see that Millennials are staying longer in the PRS as a good sign – which it is – but it also means that the government will have to look at supporting the housing sector to ensure there are enough homes for them and older generations too.”
