Yahoo Finance UK could be past 'peak rental growth' as average rents hit £1,201
For renters across the UK some respite from spiralling costs could be on the horizon, as the pressure on housing costs eases into 2024.
There are signs that rents have risen too fast in some areas, according to an analysis by property platform Zoopla, which recorded a jump in cuts to asking rents of over 5%. This is tracking in line with the second half of 2020 when the pandemic hit demand, and is evidence of growing resistance to rent increases from renters who may be looking to move to cheaper areas.
The volume of asking price reductions is currently highest in London — 10% of rental listings in November 2023 saw asking rent reductions of over 5%. Meanwhile, the proportion across the rest of the UK has also jumped to 7%, the highest it has been for over five years.
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. Reductions are spread across the market with a concentration in the £1,000 to £1,500 per month bracket.
UK average rent currently stands at £1,201 per month — the highest rents are in in London (£2,049 pcm), Oxford (£1,611 pcm) and Brighton (£1,565 pcm).
A hit to rental growth
Research also shows the UK could be past "peak rental growth", with London recording the biggest slowdown in growth, down to 9%, having seen 17% hikes last year.
Rents in London have risen rapidly since mid 2021, having fallen by 10% over the pandemic (2020-2021). Annual rental growth is lowest in the inner London boroughs of the City of London (6.3%), Westminster (7.3%) and Tower Hamlets (7.3%).
“The slowdown in rental growth over 2024 will be down to a weaker labour market, slower earnings growth and growing affordability pressures limiting the pace at which rents can rise, particularly in southern England," said Richard Donnell, executive director at Zoopla. "Rents have room to rise above the UK average in regional cities where affordability is less of a constraint, but this won’t be the case indefinitely.”
Read more: UK mortgage lending set for 'sharp contraction' in 2024
At the other end of the spectrum, rental growth in Scotland continues to gain momentum and currently stands at 12.9%, up from 11.4% a year ago. Demand has been strong in Scotland but rent controls are another factor behind the strong growth in rents for new lets.
Landlords and agents are likely to be pushing rents higher to allow for the fact that rental increases will be capped at 3% a year throughout a tenancy and with the affordability headroom to do this. At a city level, rental growth in Edinburgh is 15.2% and 13.2% in Glasgow.
Northern regional cities such as Manchester, Bolton, Derby and Newcastle are also seeing double-digit rental growth from strong demand and greater headroom for rents to increase relative to earnings.
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