In the rental sector, most property types come with an ideal target tenant type, but the amount each renter is willing to pay could be changing.
Like house prices, UK rents have been going up and up in recent years. This is caused by a variety of factors: lack of supply pushing prices up, older tenants having more disposable income, rental property offerings improving.
New research published by Hamptons has revealed that UK tenants paid a whopping £31bn in rent during the first half of 2022. This has gone up by around £750m compared with the first half of 2017, and by £17.3bn compared with the first half of 2008.
Hamptons discovered that this means the total amount of rent being forked out has more than doubled since 2008. Presuming rental levels stay the same, the full-year rental amount will be £63bn this year, while it was £27.8bn for 2008.
Which tenant type foots the biggest bill?
Hamptons’ survey looked at the amount of rent paid by each tenant type based on their generation. You’d be forgiven for not knowing the specifics of each label, so here is the breakdown below:
- Silent: born between 1928 and 1945
- Boomer: 1946-1964
- Generation X: 1965-1980
- Millennial: 1981-1996
- Generation Z: (1997-2012)
Interestingly, the outgoing rental costs for those in the Generation Z bracket have soared since H1 2020. This, says Hamptons, is driven by growing numbers of this group flying the nest, so it makes sense. In 2022, they are projected to pay £11.7bn, up 222% on last year.
Every other tenant type, though, has seen an overall fall year on year. Millennials are one of the most ‘common’ tenant types, forking out the most (£22.4bn this year), but this is down 18% compared with last year. The bill has fallen by 49% since 2017 as more of this age group buy homes.
The so-called silent generation, who make up the smallest part of the rental sector, have seen the biggest drop in their rental bill of 49% since last year; it is projected to be £0.4bn this year.
See the table below for the full outline:
Rent paid by the generations
|H1 2022||2022 projected||YoY Change %|
|Silent (1928-1945)||£0.2 bn||£0.4 bn||-49%|
|Boomer (1946-1964)||£4.4 bn||£8.9 bn||-7%|
|Generation X (1965-1980)||£9.7 bn||£19.6 bn||-5%|
|Millennial (1981-1996)||£11.0 bn||£22.4 bn||-18%|
|Generation Z (1997-2012)||£5.8 bn||£11.7 bn||222%|
|Total||£31.0 bn||£63.0 bn||2%|
Up and down the country
According to Hamptons – and many other sources – the supply issues in the rental sector are ongoing across the country. Its data suggests there are currently 54% fewer homes on the market than in June 2019, so tenants are scrabbling for homes in some cases.
Over the past 12 months, rents overall have risen by 8.8%, which is down on the result from May 2021 to May 2022, which showed an 11.5% increase. Tenant type notwithstanding, the average being paid is now £1,163 per month.
As ever, the growth varies across the country, with London now showing the biggest leaps in its rental prices. In inner London, rents have risen by 35.1% over the past year, from £1,980 to £2,675.
Other areas seeing rapid increases are the south west with a 10.4% year-on-year rise, the Midlands (9.1%) and the north (8%). The south east, which has seen more property come onto the market, has recorded a small 3.7% rental increase.
Feeling the squeeze
Aneisha Beveridge, head of research at Hamptons, said: “As Generation Z fly the nest, they’ve seen a tenfold rise in what they pay in rent over the last three years meaning they now hand over a fifth of all rent paid.
“Generation Z are joining the rental market faster than any previous generation, mostly because fewer are likely to become young homeowners.
“It will take a significant uplift in homeownership rates over the next five or so years to stop Generation Z paying more in rent than Millennials, which seems unlikely as interest rates and house prices continue to rise.
“Older generations have shown that by the time a tenant hits middle age, they’re increasingly less likely to ever become a homeowner.
“For many, the deposit remains as much of a barrier to buying as it was in their twenties, while getting a mortgage becomes tougher since lenders are cautious about extending a mortgage deep into retirement age.
“This typically means the term gets progressively squeezed, pushing up the monthly payments and acts as a barrier to homeownership.”