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The pace of UK rental growth is easing, in a sign of respite for tenants after soaring rises in recent years.
Rents are expected to rise by 5 per cent in 2024, half of the rate of growth in 2023, according to property site Zoopla in its December rental market report.
Tenants have been hit by skyrocketing rental costs in recent years after prolonged high demand and constrained supply. Many landlords have also passed on the costs of higher mortgage interest rates. While rents are not set to decline, 5 per cent would be the lowest growth rate since September 2021.
Nationally, rents for new lettings are 9.7 per cent higher over the past 12 months, down from 11.9 per cent a year ago.
Asking-rent reductions — the extent to which asking-rents for rental listings are being cut by landlords to attract more applicants — increased by 5 per cent, Zoopla said. In London 10 per cent of listings made reductions in asking-rents of more than 5 per cent, compared with 7 per cent across the UK.
“This is evidence that the strong upward momentum in rents over the past three years is reaching a ceiling as renters face growing affordability pressures,” said Zoopla.
The average UK rent has now reached £1,201 a month, £2,049 a month in London, £1,611 in Oxford and £1,565 in Brighton.
London rents are set to rise by just 2 per cent in 2024, down from 9 per cent in 2023 and 17 per cent in 2022.
Rental growth in Scotland, however, has continued to climb at 12.9 per cent, up from 11.4 per cent a year ago. Zoopla said that rent controls were a likely factor contributing to the increases. In Edinburgh it hit 15.2 per cent and 13.2 per cent in Glasgow.
“Landlords and agents are likely to be pushing rents higher to allow for the fact that rental increases will be capped at 3 per cent a year throughout a tenancy and with the affordability headroom to do this,” the company said.
Rents still account for a large, but falling portion of tenant’s earnings, with the average UK renter spending 28.4 per cent of their income on rent, according to Zoopla’s September rental report. This time last year, UK renters spent on average 35 per cent of their income on rent.
According to Hamptons, an estate and letting agent, the total amount of rent paid in 2023 will be £85.6bn, more than twice what it was in 2010 and £8bn more than in 2022, the largest annual jump on record.
Since 2010, the number of households renting has increased by 25 per cent.
While rent rises are slowing, factors such as landlords selling up and people moving back to cities after the pandemic are helping keep rents high.
“It’s a bit like the inflation numbers. Rent is going up a bit slower than before, but rents aren’t coming down any time soon,” said Neal Hudson, a housing market expert at Residential Analysts. “There’s still clearly an underlying mismatch in the rental market between the number of people who need to rent and the number of homes available.”
According to Hamptons, millennials — those born between 1980 and 1994 — dominate the rental market, spending £36.9bn in 2023.
“Higher interest rates in the medium term are likely to mean more millennials rent for longer,” said head of research Aneisha Beveridge. “With the rate at which millennials climb on to the housing ladder slowing, they’re starting their own families and renting larger, more expensive homes — which is pushing up the amount of rent they pay.”
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