A recent report from Hamptons estate agency has shed light on a somewhat unsettling trend for millennials in the UK: many of those who haven’t bought a home yet are likely to be renting well into their retirement years. Millennials, currently around 35 years old, form nearly half of Britain’s rental market. This age group, born between 1980 and 1994, has been a dominant force in the rental sector, but their future in homeownership looks increasingly uncertain.

Record Rental Payments

The lettings market in Britain is witnessing record-high rental payments. This surge is largely due to a shortage of available properties and high demand, which often results in multiple applications for properties within days of being listed. According to Hamptons, the total rent paid by tenants in Britain is expected to jump by an astonishing £8 billion this year, reaching a total of £85.6 billion. This figure is more than double what it was in 2010.

Millennials Dominating the Rental Market

Millennials continue to dominate the rental market, having spent a record £36.9 billion on rent in 2023. This reverses a trend seen between 2016 and 2020, where more millennials were becoming homeowners. However, due to strong rental growth since the pandemic and higher mortgage rates, many millennials are renting for longer periods, leading to increased rental expenses. In 2016, millennials made up 58% of all rented households, a figure that dropped to 42% in 2021 but has since risen to 44% in 2023.

Generational Shifts in Renting

While millennials represent a significant portion of renters, Generation Z (born between 1995 and 2012) is also becoming a key player in the rental market. In 2023, Gen Z tenants spent £30.5 billion on rent, marking the largest annual increase among all generations. In contrast, older generations like Generation X, Baby Boomers, and the Silent Generation saw slight decreases in their rent bills, mainly due to some becoming homeowners later in life.

London’s Rental Market, An Outlier

London’s rental market stands out with the strongest growth over the past year. Average rents in the capital rose to £2,425 a month, an 11.8% increase from the previous year. This growth is primarily driven by Inner London, where rents on new tenancies grew by 13.2%. The total rent bill in London is now larger than the combined total for the North of England, Midlands, Wales, and Scotland.

The Nationwide Picture

Despite London’s exceptional growth, rental increases across Britain have started to cool slightly, down from a peak of 12% in August. Nevertheless, rental growth remains robust, not decelerating as much as expected, given the rising costs for landlords and the ongoing shortage of rental homes.

The Future of Millennial Renting

Aneisha Beveridge from Hamptons notes that the increase in the rental bill is partly due to more households renting and partly because of rising rents. With higher interest rates expected to persist, more millennials are likely to continue renting, leading to a higher total rent bill. As millennials delay homeownership, they are starting families and renting larger, more expensive homes, further driving up their rental expenditures. This trend suggests that millennials might increasingly find themselves renting for the foreseeable future, possibly into their retirement years.