Does increase in rent in UK affect the inflation

Inflation is not a pleasant circumstance to be in for any average working professional. The inflation rate in the UK is marching towards the highest ever record the region has ever seen in decades. The soaring cost of living is negatively impacting house hunters because of the high rental fees demanded from property owners. People are now looking for alternative housing options in places with a comparatively lower price to pay for their lifestyle choices like the suburbs of Lee. If you are looking for feasible property purchase options, you can get in touch with estate agents in Lee. But to know how the surging rental rates affect inflation, read on.

The condition of rental rates in the UK

It all started when the association for Housings and other related boards gained the opportunity to increase the rental rates in the UK. The set formula for the rise was one plus percentage of the current CPI every year. The year 2020 worked in favour of the property owners as the CPI was 3.1% then. So a total of 4.1% rental rise was decided upon by the association from April of the same year. This is considered the highest in an entire decade so far. 

Lifestyle and Housing Demands

Blame the pandemic for contributing to the low rental property availability and lower housing demands. The numerous lifestyle adjustments made because of the work-from-home scenario and no-visitor policies, which still continue to be the norm are major factors causing such causing such imbalance in the demand-supply ratio on the housing front. Therefore the average monthly salaried citizens struggle to make ends meet, bearing the brunt of inflation consequently. 

Trends in rental pricing

The following trends have been observed in the past few years when considering fluctuations in rental fares and housing preferences.

• The consumer price index value had seen an overall 0.3% increase in March 2021. The following year i.e, March 2022 saw a hike of 1.1%. The consolidated CPI rate until 2022 Feb which was 6.2% reached an unbelievable 7.0% in March, of the same year. 
• If you compare the rate of the rental fees in the year 2021 with that of 2022, you will find a 2.4% rise. Although rental rates have been on an increasing trend since 2015, the recent growth rate is much more impactful than it had ever been. 
• The average rent you are required to pay in the UK is estimated to be over £2,200. This marks a visible 16% increase in the last few years’ rental reports. 
• There has been a 38% reduction in the availability of housing properties but 60% demand from the tenants exhibiting an obvious mismatch in the ratio. 

The impact of rising rents on inflation

It is estimated that 6.2% of the March inflation is a consequence of the sudden increase in rental rates. The low demand for housing properties has led to a surge in the prices of labour fees and construction materials. The inflation rate concerning consumer prices in the UK in July is 10.1%, the highest recorded in the last thirty years. This is exactly why a lot of low-paid London residents are struggling because he pays over 30% of their income on rent.

The Scope of property ownership in the future 

The trend of inflation and rental rates is predicted to rise further but can be slowed down. There has been a huge pressure among the governing authorities on relaxing the rapidly increasing cost of living. From a practical perspective, property providers have to keep up with the standard rent rates to survive. However, Mayor Sadiq Khan has reportedly proposed to bring in changes in the Renter’s Reform Bill and also a two-year freeze on house rents. This can provide better security to workers and landowners in the future. 

Summing up

As you can see, there is a visible impact on inflation because of the high rental fees in the UK. However, the cases are interlinked. A statistical report shows that an average 30-year-old spends 37% of the combined income of his family on housing allowances. It is recommended to understand the market trends and scopes for further fluctuations before investing in a property in the UK. Choose places with a relatively lower cost of living when you plan to own or rent a property.