Advertisement
UK markets close in 51 minutes
  • FTSE 100

    8,198.72
    +7.43 (+0.09%)
     
  • FTSE 250

    20,427.18
    +17.25 (+0.08%)
     
  • AIM

    780.08
    +1.76 (+0.23%)
     
  • GBP/EUR

    1.1841
    +0.0014 (+0.12%)
     
  • GBP/USD

    1.2728
    +0.0018 (+0.14%)
     
  • Bitcoin GBP

    50,996.86
    -282.95 (-0.55%)
     
  • CMC Crypto 200

    1,379.76
    +42.01 (+3.14%)
     
  • S&P 500

    5,487.03
    +13.80 (+0.25%)
     
  • DOW

    38,834.86
    +56.76 (+0.15%)
     
  • CRUDE OIL

    81.77
    +0.20 (+0.25%)
     
  • GOLD FUTURES

    2,342.40
    -4.50 (-0.19%)
     
  • NIKKEI 225

    38,570.76
    +88.65 (+0.23%)
     
  • HANG SENG

    18,430.39
    +514.84 (+2.87%)
     
  • DAX

    18,088.00
    -43.97 (-0.24%)
     
  • CAC 40

    7,575.40
    -53.40 (-0.70%)
     

Record immigration behind a third of rent rises

rental property
rental property

Record levels of immigration have driven a third of the rent growth in the UK since Covid, new analysis shows.

In the two years to June 2023, immigration led to an additional 430,000 households wanting to privately rent homes, meaning rents have climbed 11pc higher than they would otherwise have been, according to Capital Economics.

On Thursday, the Office for National Statistics (ONS) will publish data showing total net immigration in 2023, which is expected to be high, after two unprecedented records set in 2021 and 2022.

Rents typically rise roughly in line with wages, but since 2021 rent growth has far outpaced salary increases. Now, Britain is grappling with a rental crisis as homes become increasingly unaffordable.

ADVERTISEMENT

Between mid-2021 and the start of 2024, UK rents rose by 30pc, according to property website Zoopla. This was nearly double the 17pc increase in wages over the same period.

The figures are in stark contrast to the decade up to mid-2021, when rents climbed by 26pc over the 10-year period, slightly less than the 27pc increase in wages.

Andrew Wishart, who runs the housing service at Capital Economics, said: “This means rents are 11pc higher than would be explained by the usual relationship between pay and rent. The vast majority of that is because of higher net migration.”

This means that around a third of the 30pc increase in rents can be attributed to immigration, Mr Wishart said.

Net immigration hit an unprecedented 467,000 in 2021, before rising even further to 745,000 in 2022, official data shows.

The number fell slightly to 672,000 in the 12 months to June 2023, but this was still nearly four times the 184,000 figure before the pandemic in 2019.

These figures suggest that, in the two years from mid-2021 to June 2023, based on the average household size, net immigration led to an additional 430,000 households looking for homes in the private rented sector, Mr Wishart said.

This was roughly triple the average 150,000 additional renting households due to immigration over every two-year period in the preceding decade.

There are 4.9 million privately rented households in the country, meaning immigration between mid-2021 and mid-2023 increased demand by nearly 9pc.

Demand in the rental sector has also climbed because high mortgage rates have locked first-time buyers out of the housing ladder, but this has been a much smaller factor than immigration, Mr Wishart said.

In 2023, first-time buyer numbers fell by around 40,000 year-on-year, meaning these people may have ended up renting for longer than normal.

Ben Brindle, researcher at the Migration Observatory, said: “It just comes back to supply and demand. If you have population growth and the housing stock is not growing as fast, that puts pressure on rents.

“Migrant homeownership rates tend to be lower, so in terms of where their demand on housing is, it is in the rental sector.”

At least 80pc of new arrivals renting for at least the first few years after they move to the UK, according to previous analysis by the ONS.

The impact is most intense in major cities. London has recorded the steepest rent growth of any part of the UK, according to Zoopla.

A report by the Centre for Policy Studies (CPS) think tank earlier this month warned that “immigration is severely exacerbating the housing crisis” because supply has not kept pace with demand.

Government housing targets to build 300,000 homes a year in England include an assumption that net immigration to England of 170,500 people per year will bring additional demand for 72,250 new homes.

These figures are far smaller than the actual numbers and yet the 300,000 per year target has still never been met, the report warned.