Generation Z, now paying a fifth of all rent, is flying the nest
Rapid rental growth will see tenants handing over a record £63 billion in rent during 2022, the first major jump for five years, according to Hamptons.
Tenants in Great Britain paid a total of £31 billion in rent during the first half of 2022, so the annual rent bill is expected to hit the record figure by the end of the year. This was revealed in the latest Hamptons Monthly Lettings Index, which also found that the total amount of rent paid by tenants has more than doubled since 2008 while surpassing the peak in 2017, despite having 275,000 fewer private tenants today than there were five years ago.
Hamptons said that during the first six months of this year, tenants paid £750 million more in rent than the same period in 2017, and £17.3 billion more than in the first half of 2008.
“Almost all the rise stems from record-breaking rents which have been driven by a lack of homes available to rent alongside investors passing on higher running costs to tenants,” Aneisha Beveridge, head of research at Hamptons, commented. “In particular, landlords have been squeezed by rising mortgage rates, alongside more expensive insurance premiums and maintenance costs.”
The rising rental bill has been driven by those born from 1997 to 2012, collectively called Generation Z, or simply Gen Z. They paid a record £5.8 billion during H1 2022, a figure likely to hit £11.7 billion over the entire year. This means that for the first time, they will pay more rent than those born from 1946 to 1964, also known as Baby Boomers.
According to Hamptons, Gen Z’s rent bill is rising at a faster pace than when the previous generation, Millennials - those born from 1981 to 1996 - started to leave home during the 2008 downturn, with far fewer buying their own place. Hamptons added that considering their current trajectory, Gen Zs are likely to be paying more than Millennials within the next three years.
“Generation Z is 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,” Beveridge said.
All other generations spent less on rent than last year. Millennials, who make up the current largest generation of tenants, paid £2.4 billion, or 18%, less in rent in H1 2022 than in H1 2021. The Millennial rent bill has fallen by nearly half, or 49%, from 2017 as many renters between their mid-20s and early 40s bought their first home.
“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 20s, 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,” Hamptons’ head of research explained.
Read more: ‘Generation Rent’ becoming ‘Generation Buy’
Hamptons also reported that rental growth rates slipped back slightly during the early summer months. Average rents across Great Britain rose 8.8% over the last 12 months, representing a slowing of growth from the 11.5% recorded in May. The average monthly rent now stands at £1,163, up from £1,069 at the same time last year.
For the second consecutive month, rents in London grew faster than anywhere else, rising 12.1% over the last 12 months, taking the average monthly rent above the £2,000 mark for the first time ever.
Inner London rents recorded a record annual growth rate of 35.1% as their strong recovery from the pandemic continued at pace. Despite record growth, at a monthly average of £2,675, rents in Inner London remain 6.5% below their October 2019 peak, and sit just 1.6% above where they were in January 2020.
Across Great Britain the number of rental homes on the market remains well below pre-pandemic levels, with 54% fewer homes on the market than in June 2019.
Hamptons, however, noted that stock levels are now slowly rising across Southern England, excluding London, compared to this time last year. There are also 10% more homes to rent in the country than last June, though this is an increase from record lows.
The Hamptons Monthly Lettings Index, which has been running since 2012, uses data from the Countrywide Group to track changes to the cost of renting. It is based on the 90,000 homes let and managed by Countrywide each year, adjusting for their location and type. It is based on achieved rather than advertised rents.
