"Young adults are staying at home for longer in order to save up, with some skipping the rental market entirely and going on to purchase a home instead"
Fewer would-be tenants are flying the nest due to soaring rents and the ongoing cost of living crisis, according to new research by Hamptons.
The number of tenants leaving the family home has been steadily declining across Great Britain since 2015 when 6.1% of tenants were first-timers - equating to 71,860 newly rented households in England.
However, due to a surge in rental costs and wider financial pressures, in the first five months of 2023 that figure has fallen to 4.6% - or 43,280 new rented households in England this year.
Had young adults continued to move from the family home into rental accommodation at the same pace as they did in 2015, it would mean there would be an extra 104,550 households looking to rent in England between 2016 and 2023.
As the average rent paid by someone leaving the parental home passes £1,000 pcm for the first time, the average would-be tenant in Great Britain is set to save £12,290 by continuing to live rent-free with parents this year. In total, this will save would-be first-time renters in England a total of £1.3bn in rent in 2023.
Those who left home paid an average of £1,024 pcm on their new place in Great Britain so far this year, up from £925 pcm in 2022 which will cost them an additional £1,190 each year.
Ten years ago, they spent an average of £642 pcm when leaving home, which equates to 37% or £4,580 in total each year less than today.
Hamptons research shows that young adults living at home in the South of England are less likely to become new renters than those in the North. So far this year, those leaving the parental home made up 5.4% of all renters in the North of England (North East, North West and Yorkshire & The Humber), compared to 3.7% of those renting in the South of England (London, East, South East & South West).
While the share of tenants leaving the family home has risen in the North over the last year, tougher affordability has kept a cap on the number of would-be tenants doing the same in the South of England.
London, however, has bucked this trend. Despite double-digit rental growth, the share of renters who have left the family home to rent in the capital has risen from 2.5% in 2022 to 3.2% so far this year.
While Londoners remain the least likely to leave the family home out of any region in Great Britain, this puts these figures back to around pre-Covid levels and reflects how more young adults, many of whom moved home to their families during Covid, are now moving back to be closer to their jobs.
Meanwhile, those living in Yorkshire & The Humber are most likely to leave home, making up 6.6% of renters moving so far in 2023.
Despite rising rents, affordability has improved for young renters. According to the ONS, the average pre-tax income of an 18-24-year old in the UK has risen 42% since 2015 to average £18,900.
Meanwhile, data shows that the average rent on a single room has increased by 26% over the same period, with one-beds rising by 30%. This means that the average young adult has spent 43% of their pre-tax salary on renting a room so far this year, down from 49% in 2015.
If these young adults were to rent a one-bed, they would likely spend 64% of their income, down from 69% in 2015. However, by splitting the cost with another full-time worker, the average one-bed would eat up 32% of their total household income in 2023, down from 35% in 2015
As rents have risen, would-be tenants are staying at home for longer in order to build up their savings to afford a larger home. 32% of tenants who moved out this year rented a studio or one-bed in Great Britain, down from 37% last year.
However, the proportion who left the family home and rented a home with at least two bedrooms rose from 63% in 2022 to 68% so far this year.
This implies that renters are either moving to more affordable areas to get the space they want or are leaving their parents a little later in life in order to build up their savings and rent with someone else.
The pace of rental growth cooled in May, with the average rent on a newly let home in Great Britain rising 9.1% year-on-year, down from 11.1% in April. Every region, apart from the South West, saw rental growth slow.
London, where rents have been rising fastest, recorded the biggest deceleration. The average cost of a newly let property in the capital rose 13.3% year-on-year in May, down from a record 17.2% in April. Inner London continued to post the strongest growth.
Scotland was the only other region to record double-digit rental growth last month. Here, rent hikes are capped on existing tenancies, but rents on the open market where a new tenant moves in are still rising quickly, up 11.6% year-on-year.
Aneisha Beveridge, Head of Research at Hamptons, comments:
“Around 105k missing renters are relying on the hotel of Mum and Dad. The number of first-time renters has been steadily falling since 2015, pushed down by the spiralling cost of living and record-breaking rental growth which has stretched affordability to the edge of its limits. Young adults are staying at home for longer in order to save up, with some skipping the rental market entirely and going on to purchase a home instead.
“The good news for tenants is that rental growth is starting to cool, and we expect that to continue throughout the remainder of the year. Average rents across Great Britain have risen 47% over the last decade, underperforming house price growth of 69% over the same period.
“However, the key issue, is that over half of that rental growth has occurred within the last four years. And this has come at a time when household incomes are under pressure from other rising costs. That said, many landlords are also facing similar pressures, and this is one of the key factors underpinning rental growth this year.”