The uplift seen in UK rent inflation data may help to explain recent rises in overall inflation numbers. Rent represents one of a number of slow-moving drivers — others include rail fares, water, and council tax bills. The ONS inflation numbers record the price of the stock of rental properties, but with tenancy contracts typically reset only once a year, it takes time for new market rates to surface. Hence, with an 8% weighting attached to rent price in the CPI, and 35% of UK households renting in 2023-24, such lagged indicators may explain continued above-target inflation in the short term.[1] The nationwide rent inflation rate has been increasing steadily since 2022 and rent prices rose by 7.8% in January compared to twelve months earlier, versus inflation for all items of 3%. The increases may be explained by rising costs for landlords, capturing second-round effects of earlier high inflation. They have exacerbated the overall increase to living expenses, especially for those renting in London. Moreover, there is good reason to suppose that rental market inflation may continue, as return-to-office (RTO) demands attract renters back to urban areas, while rental supply appears to be slowing, according to the Royal Institution of Chartered Surveyors (RICS) Lettings Market Survey for landlord instructions.[2] RICS’s findings suggest that slowing supply may in part be due to landlords expecting reform and stricter regulation.
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[1] https://assets.publishing.service.gov.uk/media/67459d3ecdd295aea8809890/2023- 24_EHS_Headline_Report_Chapter_1_Profile_of_households_and_dwellings_Annex_Tables.ods
[2] https://www.rics.org/content/dam/ricsglobal/documents/market-surveys/WEB_January_2025_RICS_UK_Residential_Market_Survey_tp.pdf
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