With central banks around the world raising interest rates aggressively to curb inflation, the Bank of England is under pressure to follow suit with further hikes expected before the end of the year. This compounds pressure on the rental sector with a greater likelihood for prospective homeowners, such as first-time buyers, to continue renting over the short to medium term.
The US Fed raised interest rates by 0.75 per cent up to a benchmark overnight interest rate in the range of 3.00 to 3.25 per cent. This was a move mimicked across the globe, from Indonesia to Norway, with forward guidance indicating further uplifts pending. In Sweden for instance, the Riksbank raised rates by 100 basis points to 1.75 per cent.
Countries that acted contrary to this trend had their currency values diminished substantially. In Japan, where central banks held interest rates stable to support a fragile economy, the Yen sank to new lows prompting government action to purchase the currency and support it. In Turkey, where its contrarian monetary policies involved lowering interest rates to boost GDP, the lira tanked to record lows given in excess of 80 per cent inflation.
Countries are contending with inflation figures ranging from 3 per cent in Switzerland to over 10 per cent in the UK, thus any hesitancy from central banks to act is being reflected in currency trading. This reduces domestic purchasing power and adds to demand pressure for rental products, as well as spending power having been eroded by inflation.
The latest English Housing Survey (2020-21) asked renters how easy or difficult they find rental costs, 75 per cent found rental payments very or fairly easy to pay. Since that time, rents have increased 12.3 per cent according to a third quarter Zoopla UK Rental Market Report, up to £1,051 on average. In London this rose to 17.8 per cent, reflecting a rebound in rents after the pandemic retreat.
“Zoopla added that another noticeable trend is rental growth in urban areas across England (10.5%), which is outpacing that of rural markets (8.5%) as strong employment growth drives demand in cities. Higher levels of new-build supply concentrated around city centres is also becoming more appealing to renters looking for smaller homes with lower running costs.”
https://propertyinvestorpost.com/zoopla-london-drives-rental-growth-to-12-3/
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