Written by: Danny Belton - Head of Lending
According to new data from Hamptons, rents rose by 8.3% in the year to the end of January 2024, down from a peak of 12.0% in August 2023. This then slowed to 10.2% in December 2023.
The research shows that last summer was the highest point in terms of rental growth, and since then, rental increases month-by-month have been in double figures, rather than triple figures.
Why is rental growth slowing?
The slowdown in growth in the UK rental market may be driven by a number of factors, including:
Tenants have been facing inflated costs for food, energy, and other essentials over the course of 2022 and 2023, which is putting a strain on their finances and making it difficult for them to afford higher rents.
Also, the UK rental market is seeing a 34% increase in available properties compared to last year - a figure which may be leading to landlords lowering rental costs to compete in a fluctuating market.
The primary factor in the slowdown can be attributed to significant lowering of rental costs in London - which saw an annual rental growth decrease of 9% (from 17.1% in August, to 8.1% in January 2024).
The slowdown in the UK rental market is likely to be welcomed by tenants, but it is also a cause for concern for some landlords. Landlords who are reliant on rental income to cover their mortgage payments may find themselves struggling financially if rents continue to fall.
The government has been urged to take action to boost the supply of rental properties in order to help address the affordability crisis. This could include measures such as increasing investment in social housing and providing tax breaks for landlords who build new homes to rent.
Despite the fact that it looks like this slowdown in growth in the UK rental market may continue throughout 2024, largely due to lenders reducing interest rates over the past few months, more pressures on landlords (such as the Renters Reform Bill) and the additional costs that follow may lead to rental growth staying ahead of inflation. It remains to be seen whether the slowdown in rental growth is a temporary blip or a sign of things to come.
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