We’re past peak rental inflation
The recent boom in rent rises for new lets is coming to an end.
Rents have been rising faster than earnings for the past 3 years but they are now increasing at their slowest pace since 2021.
In news that will be welcomed by under-pressure renters looking to move, this is a clear sign that we’ve passed peak rental inflation.
Demand for rented homes has fallen by 39% over the last year, albeit off a high base, and the rental market has moved from ‘red-hot’ to still ‘hot’.
Our data shows there are 17 people still chasing every home for rent, which is double the pre-pandemic average seen between 2017-2019.
But the supply of rental homes available per estate agent has slowly started rising, increasing by 17% in the last year.
This is because more homes are being bought by corporate landlords, while lower mortgage rates are making it a little easier for renters to buy their first home, freeing up rental properties.
However, the general availability of homes for rent remains a major challenge for renters: the average agent still has a third fewer rental homes available than the pre pandemic average.
Rents rise at slowest pace in nearly 3 years
Rents for new lets have risen by 5.7% over the last 12 months, reaching an average £1,232 per month across the UK.
But in the last 6 months, they’ve risen by just 1.6%, the lowest increase seen since 2021.
The heat is coming out of the rental market, mainly as a result of affordability pressures.
If rises remain on this trajectory, rents for new lets are on track to be 3-4% higher over 2024, versus 8% in 2023 and 11% in 2022.
75% of cities record lower rent inflation
Changes in supply and demand at a city and local level are impacting rents to different degrees.
A slowdown in overseas student applications and a weaker labour market both explain some of this weakening in demand for renting.
Falling mortgage rates are also helping some renters to become first time buyers, freeing up rental homes for others.
In some cities, rents have been rising so fast they have ‘over-shot’ what renters are prepared to pay. As a result, we’re now seeing rents falling in some areas.
Our rental index tracks rents across 64 cities. In the first 6 months of 2024, rents have fallen in 5 cities: Nottingham, London, Worthing, Brighton and Glasgow. Meanwhile, the rate of inflation has dropped significantly across 75% of cities.
However, rents are still rising fast in some, for example Bradford and Liverpool, where there is headroom for rents to rise at an increased rate.
Overall, rents are rising fastest in accessible suburbs, larger cities and areas where rental properties are still offering some value for money.
Rochdale, Doncaster, Sunderland, Southend and Telford have all recorded rental inflation of over 4% in H1 2024.
Rents fall across a third of London boroughs
London is the UK’s most expensive market to be a renter.
With an average monthly rent of £2,172, almost 70% higher than the UK average, rents here are more than twice the price of many other regions.
The high cost of renting in the capital means affordability is a growing constraint on rental inflation and our index shows rents have fallen in more than a third of London boroughs in the first half of 2024.
The falls have been concentrated in inner east London, led by Tower Hamlets, Newham and Greenwich. And rental inflation has now slowed across all areas of the capital.
Corporate investors are buying new homes for rent, boosting supply and increasing choice, which also explains why rents have been rising more slowly across London, alongside affordability constraints.
However, higher growth rates are still being registered in outer London areas, led by Merton and Havering, where rents are below the London-wide average.