Berlin-style rental rate freeze could save tenants thousands

June 19, 2019

Last week the German finance minister Olaf Scholz voiced his support of a controversial five-year rent freeze to tackle the rising cost of living in Berlin so that the city doesn’t ‘end up like London’. While shares in German property groups have since plummeted, leading UK room share platform, ideal flatmate, has looked at what a similar initiative could mean for UK tenants.

In the last five years, London rents have increased from an average of £1,530 a month to £1,679 – an increase of 2.44% annually. Should this growth trend persist for a further five years, it would push the average rent in the capital to £1,894 a month.

However, the implementation of a five-year rental rate freeze would see London tenants save a total of £7,620 in rental costs.

Tenants in Newham stand to save the most, with rents increasing by 6.95% on average in the borough over the last five years, an increase of £329 in the monthly rent. If this continues, the average rental price could hit £1,977 a month in five years, but a freeze would see tenants save a notable £19,413 as a result.

A five-year rental rate freeze would also see a five-figure saving for tenants in Barking and Dagenham, Hackney, Waltham Forest, Tower Hamlets, Redbridge, Kensington and Chelsea, the City of London, Havering, Lewisham, Southwark, Enfield and Ealing.

While the capital is home to the highest rental costs in the UK and would remain the least affordable over the next five years, higher rental growth rates in other major regional cities mean that tenants outside of the capital could also stand to save big due to a rental rate freeze.

Oxford tenants would benefit with a rental freeze saving totalling £17,746 over the next five-years. The average rent in Oxford over the last five years has increased at an average of 7.3% a month, second only to Manchester at 8%, which could see Oxford’s rental costs hit £1,741 a month.

Bristol has also seen a sharp increase in rental prices, up 6.75% annually over the last five years. A similar growth trend would see the average monthly rent hit £1,489 however, a five-year rental freeze would save tenants a total of £14,294. Tenants in Manchester, Oxford, and Newcastle would also enjoy a five-figure saving.

Co-founder of ideal flatmate, Tom Gatzen, commented:

“The figures suggest that should such a rental rate freeze be introduced in London and the wider country, the saving for tenants could be considerable. This saving could go some way towards a mortgage deposit and a foot on the ladder, while at the same time helping to alleviate some of the pressure on the rental sector.

Any pro-tenant initiative can, of course, be viewed as a positive, but the mere suggestion of a rental rate freeze in Berlin seems to have sent the property market into meltdown. There is every chance that the same could happen here as a recent string of government changes to the buy-to-let sector have already diminished landlord confidence levels.

This further dent on profitability could see more opt to invest elsewhere, however, the meteoric rise of the build-to-rent sector is providing a viable alternative to traditional stock supply and could therefore be the answer, stomaching a static rate of rental growth far better without any detriment to the tenant.”

Example of how total rental saving was calculated using England data.
English rental growth and predicted saving of a rent freeze
 
Year
Average Rental Cost
 Annual Change
Annual Saving**
 
2014
£742
2015
£788
6.20%
2016
£839
6.47%
2017
£831
-0.95%
2018
£844
1.56%
2019*
£872
3.32%
Average Annual Increase (2014-18)
£336
2020*
£901
3.32%
£684
2021*
£931
3.32%
£1,043
2022*
£962
3.32%
£1,414
2023*
£994
3.32%
£1,797
Total Saving
£5,274
 
* shows predicted rental growth based on previous average annual increase and the saving as a result of a rental rate freeze.
** annual saving is the saving between the average monthly rent in each year and the average monthly rent in 2018, multiplied by 12.
 
Rental rate freeze saving by region
 
Area
2014
2018
Average annual increase
2023 Average
Total Saving
ENGLAND
£742
£844
3.32%
£994
£5,274
EAST
£705
£859
5.10%
£1,101
£8,438
LONDON
£1,530
£1,679
2.44%
£1,894
£7,620
SOUTH EAST
£873
£984
3.08%
£1,145
£5,693
SOUTH WEST
£695
£796
3.45%
£943
£5,181
EAST MIDLANDS
£542
£616
3.25%
£723
£3,767
WEST MIDLANDS
£577
£643
2.75%
£736
£3,301
NORTH WEST
£541
£605
2.84%
£696
£3,210
NORTH EAST
£490
£539
2.43%
£608
£2,437
YORKSHIRE AND THE HUMBER
£553
£587
1.52%
£633
£1,634
Rental rate freeze saving by London borough
 
Area
2014
2018
Average annual increase
2023 Average
Total Saving
Newham
£1,084
£1,413
6.95%
£1,977
£19,413
Barking and Dagenham
£895
£1,193
7.57%
£1,719
£18,000
Hackney
£1,545
£1,856
4.86%
£2,353
£17,326
Waltham Forest
£1,036
£1,303
6.06%
£1,749
£15,422
Tower Hamlets
£1,482
£1,762
4.53%
£2,199
£15,269
Redbridge
£1,003
£1,267
6.15%
£1,708
£15,234
Kensington and Chelsea
£3,030
£3,173
2.35%
£3,564
£13,861
City of London
£1,971
£2,189
3.27%
£2,572
£13,478
Havering
£913
£1,135
5.64%
£1,493
£12,423
Lewisham
£1,065
£1,280
4.83%
£1,620
£11,868
Southwark
£1,496
£1,705
3.46%
£2,021
£11,122
Enfield
£1,150
£1,357
4.30%
£1,675
£11,112
Ealing
£1,338
£1,532
3.48%
£1,818
£10,056
Wandsworth
£1,670
£1,855
2.81%
£2,131
£9,739
Croydon
£974
£1,133
3.92%
£1,373
£8,428
Harrow
£1,203
£1,359
3.22%
£1,593
£8,229
Greenwich
£1,235
£1,392
3.11%
£1,622
£8,119
Lambeth
£1,519
£1,670
2.44%
£1,884
£7,573
Richmond upon Thames
£1,917
£2,000
1.96%
£2,204
£7,249
Hillingdon
£1,117
£1,245
2.92%
£1,438
£6,804
Brent
£1,448
£1,582
2.31%
£1,773
£6,779
Haringey
£1,385
£1,520
2.38%
£1,710
£6,716
Islington
£1,774
£1,904
1.90%
£2,091
£6,661
Bexley
£902
£1,026
3.43%
£1,214
£6,622
Sutton
£1,003
£1,114
2.78%
£1,278
£5,788
Hammersmith and Fulham
£1,892
£2,005
1.56%
£2,167
£5,764
Westminster
£2,651
£2,709
1.02%
£2,850
£5,031
Camden
£2,046
£2,117
1.27%
£2,255
£4,910
Merton
£1,487
£1,576
1.67%
£1,712
£4,833
Bromley
£1,160
£1,250
1.89%
£1,373
£4,368
Barnet
£1,461
£1,535
1.55%
£1,657
£4,364
Kingston upon Thames
£1,337
£1,355
0.49%
£1,388
£1,199
Hounslow
£1,381
£1,296
-1.16%
£1,222
-£2,670
Rental rate freeze saving by city
 
Area
2014
2018
Average annual increase
2023 Average
Total Saving
Cambridge
£934
£1,224
7.30%
£1,741
£17,746
Bristol
£828
£1,074
6.75%
£1,489
£14,294
Manchester
£609
£824
8.00%
£1,211
£13,206
Oxford
£1,177
£1,402
4.64%
£1,759
£12,458
Newcastle upon Tyne
£549
£713
7.31%
£1,014
£10,342
Nottingham
£520
£670
6.74%
£928
£8,901
Bournemouth
£712
£862
5.02%
£1,101
£8,339
London
£1,530
£1,679
2.44%
£1,894
£7,620
Portsmouth
£684
£784
3.56%
£934
£5,270
Leicester
£489
£585
4.61%
£733
£5,162
Birmingham
£623
£710
3.34%
£837
£4,457
Liverpool
£426
£499
4.21%
£613
£3,997
Sheffield
£537
£613
3.41%
£725
£3,936
Southampton
£741
£788
1.57%
£852
£2,274
Plymouth
£586
£578
-0.34%
£568
-£353
Leeds
£928
£762
-3.93%
£624
-£5,110

 

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