According to the HomeLet Rental Index, rental prices in the UK have been steadily increasing, with the average rent in the UK being £1,229 per month as of June 2023. This represents a 10.4% increase from the previous year. The average monthly price in London has risen by 1.9% since last month to £2,077 PCM, which is 12.5% higher than in June 2022. Rising rents have become a significant concern, making it increasingly difficult for employees relocating to the country to find affordable housing. This article examines the main factors driving this trend, including housing supply and demand imbalances, inflation, and legislative changes, and discusses the implications for employee relocations.
Housing Supply and Demand Imbalance: Challenges for Employee Relocations
A persistent imbalance between housing supply and demand has been a significant contributor to rising rents. Similarly to many other countries, the UK has experienced a shortage of affordable rental properties, driven by factors such as population growth, changes in household formation, and limited new housing construction. This supply-demand imbalance has put upward pressure on rental prices, as increased competition for available housing drives prices higher.
For employees relocating to the UK, this imbalance presents a challenge in finding suitable and affordable housing. The limited availability of rental properties may lead to longer search times and increased costs for temporary accommodation during the relocation process.
Inflation and its Effects on Employee Relocation
Inflation has been impacting various sectors of the economy, including housing. As the cost of goods and services increases, so does the cost of living. With wages not keeping pace with inflation, relocating employees may find it increasingly challenging to make ends meet, especially when it comes to housing costs.
Companies should be aware of the impact of inflation on the cost of living and consider adjusting relocation packages and cost-of-living allowances accordingly to help alleviate the financial burden faced by relocating employees.
Legislative Changes and their Impact on the UK Rental Market
In addition to supply-demand imbalances and inflation, legislative changes have also played a role in rising rents. For instance, higher second home stamp duty, limiting mortgage interest tax relief and stricter energy efficiency standards have impacted landlords and the rental market, further contributing to the rise in rental prices. Furthermore, the Renters Reform Bill is recently passed legislation that includes provisions such as the abolition of ‘no-fault’ evictions, the introduction of a new ombudsman scheme for private tenants, and other reforms to promote rental affordability and protect tenants. The Renters Reform Bill is expected to come into law in 2024, but many landlords have already left the market due to increased regulations and a decrease in return on investment.
Companies should stay informed about legislative changes affecting the UK rental market to better understand the factors influencing rental prices and to provide accurate guidance to relocating employees.
Rising rents present a challenge for companies with employees relocating to the UK as they strive to find suitable and affordable housing. Understanding the factors driving this trend, such as housing supply and demand imbalances, inflation, and legislative changes, is essential for navigating the UK rental market effectively. By staying informed about these factors and adjusting relocation packages and cost-of-living allowances accordingly, companies can help alleviate the financial burden faced by relocating employees and ensure successful international assignments.