The North East of England is no stranger to affordability challenges, but recent trends suggest that the region’s rental market is on the cusp of a major shift. With rising rents in the North East forecast to continue into 2025, tenants and landlords alike are feeling the strain. A shortage of rental properties, combined with increasing costs for landlords, has created a perfect storm of supply and demand pressures. The question now is how the region will navigate the looming "affordability ceiling," where further rent increases become unsustainable.
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Understanding the 2025 Forecast
According to Savills, rents in the North East are projected to rise by 3% in 2025, following significant increases in 2023 and 2024. This slower growth rate reflects a market beginning to reach its limits, with tenants struggling to keep up with rising costs. Nationally, private renters are spending an average of 35.3% of their income on rent—a proportion that is forecast to climb further in 2024 before stabilising.
For the North East, the affordability ceiling could be reached sooner than in other regions due to lower average incomes. With wage growth lagging behind rental increases, many renters are being pushed to the financial brink. The affordability ceiling marks the point where tenants cannot absorb further increases, forcing landlords to reassess their strategies.
The Impact of Rising Rents in the North East
The effects of rising rents in the North East are already evident. Tenants are being forced to make tough choices, such as moving to less desirable areas, sharing housing, or downsizing to manage costs. This is particularly pronounced in urban centres like Newcastle, where demand for rental properties is highest.
For landlords, the situation is equally challenging. Rising mortgage rates and increased regulatory pressures, such as new energy efficiency requirements, are squeezing profits. Many small-scale landlords, who are a cornerstone of the North East rental market, are exiting the sector altogether, further tightening supply.
Why Build to Rent Falls Short
While some view Build to Rent (BTR) as a solution to the rental crisis, it’s unlikely to alleviate the challenges posed by rising rents in the North East. BTR developments, often geared towards higher-income tenants, provide premium amenities that drive up costs. This model does little to address the needs of renters on lower incomes who are already struggling with affordability.
Furthermore, BTR projects are typically concentrated in urban centres like Newcastle, neglecting smaller towns and rural areas where rental shortages are just as pressing. The slow pace of development and high costs of these projects make them an ineffective solution for the North East’s immediate rental challenges.
Preparing for the Affordability Ceiling
As the North East heads into 2025, addressing the affordability ceiling will require coordinated action from policymakers, landlords, and developers. Sustainable solutions are needed to balance the interests of tenants and landlords while increasing the availability of affordable rental housing:
Increase Housing Supply: Policymakers must focus on delivering affordable rental homes across the region, particularly in areas outside Newcastle. Incentives for small-scale developments and streamlined planning processes could help.
Support Small-Scale Landlords: Small landlords play a critical role in providing affordable housing. Tax incentives or grants for energy efficiency upgrades could encourage them to remain in the market.
Boost Local Wages: Tackling wage stagnation is essential to address affordability issues. Higher incomes would allow renters to better cope with rising rents and other living costs.
Encourage Long-Term Stability: Offering longer leases with predictable rent increases can provide tenants with greater financial security while ensuring landlords have reliable income streams.
Looking Beyond 2025
The issue of rising rents in the North East is not just about numbers—it’s about the people and communities affected by a rapidly changing market. While the region remains more affordable than many parts of the UK, the pressures of limited supply and stagnant wages are eroding this advantage.
By addressing the root causes of these challenges and supporting both tenants and landlords, the North East has the opportunity to set a new course for its rental market. As 2025 approaches, the focus must be on creating a balanced, sustainable system that works for everyone, ensuring the region continues to thrive in the face of change.
How Clarice Carr & Co Can Help
Navigating the challenges of rising rents in the North East and the looming affordability ceiling requires expert insight and tailored solutions. At Clarice Carr & Co, we understand the unique dynamics of the North East rental market and work closely with landlords and investors to help them adapt and thrive.
Whether you’re a landlord facing the pressures of rising costs or considering your next property investment, our team can provide guidance on balancing rental yields, managing regulatory changes, and future-proofing your portfolio. With our local expertise and deep understanding of market trends, we’ll help you turn challenges into opportunities in this evolving market.
Want to know more? Check out our website or get in touch.
Frequently Asked Questions
What is causing rising rents in the North East?
The increase in rents is driven by a shortage of rental properties and high demand. Many landlords are exiting the market due to rising mortgage rates and new regulations, further tightening supply.
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