New data from the Office for National Statistics (ONS) paints a challenging picture for renters and buyers across the UK. Private rents have climbed by 8.7% in the year to October 2024, with the average rent reaching £1,307 per month, while house prices increased by 2.9% year-on-year to an average of £291,828 in September. Experts warn of continued struggles for both renters and aspiring homeowners as affordability worsens.
Renters face unrelenting price hikes
Rent inflation hit its highest level in London at 10.4%, compared to the lowest increase of 5.9% in Yorkshire and the Humber. These rising costs are forcing many renters to downsize, move to less desirable areas, or return to shared accommodation.
Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, explained: “Renters are stuck in an endless cycle of rising costs. It’s forcing more to consider living somewhere smaller, in a worse area, or further from work to make ends meet.”
Coles also highlighted the difficulty of saving for a deposit when renters spend 36% of their household income on essential housing costs, including rent, council tax, and energy bills. “For many, the only way out of the endless cycle of rising costs is to buy, but this is far easier said than done when rents absorb so much of your income,” she added.
The imbalance in the rental market continues to drive rents higher, with Propertymark reporting 10 prospective tenants for every available property. Alex Upton, Managing Director of Specialist Mortgages & Bridging at Hampshire Trust Bank, warned: “Unless there’s a meaningful increase in supply—which isn’t on the horizon—this competition will keep pushing rents up.”
House prices rising but market sentiment cooling
House prices grew modestly by 2.9% in the year to September, with the average price for first-time buyers hitting £259,000. However, challenges lie ahead for sellers as the property market enters its traditionally slower winter period.
Sarah Coles noted that optimism from the Bank of England’s recent rate cut had briefly boosted buyer enthusiasm, but this was dampened by the Budget, which introduced higher employers’ National Insurance contributions and a raised minimum wage. These factors are delaying further rate cuts and pushing mortgage rates back up, pricing out potential buyers.
“Sellers could face a fairly bleak mid-winter,” Coles warned. “Those who are keen to sell are going to have to be realistic about the price they can achieve at the moment.”
Meanwhile, buyers are racing to beat the March 2025 stamp duty changes, which will see a lowering of the bands for first-time buyers. This is expected to drive up competition and prices in early 2025, making homeownership even harder for those with modest deposits.
Richard Harrison, Head of Mortgages at Atom Bank, explained: “First-time buyers with modest deposits may see the prospect of homeownership become more difficult as a result, which means lenders need to step up and deliver competitive, high LTV products.”
Long-term affordability concerns
The challenges facing renters and buyers alike raise questions about the broader housing market’s future. Brian Byrnes, Head of Personal Finance at Moneybox, highlighted the difficulties facing aspiring homeowners: “Nearly 6 in 10 aspiring first-time buyers have saved far less for their deposit than they’d hoped, and rising rents are exacerbating this issue.”
He urged the government to consider measures such as raising the Lifetime ISA (LISA) property price cap to help more first-time buyers: “Without the right measures in place to support and nurture the next generations of homeowners, the government could limit people’s financial potential in life.”
As the rental market tightens and house prices continue to rise, alternative options such as shared ownership are gaining traction. Tanya Elmaz, Director of Sales at Together, predicted a 126% growth in shared ownership lending by 2029, adding: “The scheme will continue to play a part in helping first-time buyers manage affordability.”
What’s next for the housing market?
While the Budget introduced hurdles for both buyers and renters renters, experts remain cautiously optimistic about long-term growth. Together’s Residential Property Market Report anticipates a 17% rise in house prices between 2025 and 2029, despite short-term uncertainty.
The ONS released private rent and house price data today: Private rent and house prices, UK – Office for National Statistics (ons.gov.uk)
