UK rental market slows as tenants hit ‘affordability ceiling’

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The average rental price in the UK has risen to another new high, even as supply and demand are starting to stabilise.

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Advertised rents in the UK outside London reached an average of £1,280 (€1,500) per month in the final quarter of 2023, according to a report by property site Rightmove.

Despite the price figure hitting a record high for the 16th consecutive month, the figure is only a £2 (0.2%) increase on the July to September figure.

Looking at annual changes, advertised rents are now 9.2% higher than last year, the lowest annual growth rate recorded since 2021.

“We cannot continue to see double-digit rent increases every year as tenant affordability simply cannot keep pace,” said Rightmove director Tim Bannister, commenting on weakening demand.

According to the new report, rising rental costs are making it harder for tenants to rent out new properties, meaning more and more landlords are being forced to lower their prices.

The number of tenants sending move requests to estate agents is now 13% lower than last year.

Putting this into context, this means agents are receiving 11 inquiries for every available rental property, down from 14 last year, but still far higher than the four they received in the same period in 2019.

“The market is still very active compared to pre-pandemic levels,” Righmove said in a note. “However, these early signs suggest an improved experience for many tenants looking to secure a rental property in 2024.”

One reason analysts are more optimistic about next year is that rental supply is slowly increasing.

The new report shows a 7% annual increase in the number of properties coming to market, a trend that could help rein in rental prices that have been inflated by unmet demand.

Despite these general trends, Rightmove highlighted large regional differences in the UK rental market.

Compared to the national average monthly bill of £1,280, London rents reached a new peak of £2,631 (€3,083) in the last three months of 2023, a quarterly increase of £4 and an annual increase of 6%.

At the other end of the price scale, the North East is the cheapest place to rent in the UK, with an average monthly cost of £865.

Only three regions – Scotland, the South West and the South East – saw a decline in average advertised rents from October to December 2023, compared to the previous three months.

When considering rising property prices, it is also important to keep inflation and wage growth in mind to determine the true effect of rent trends on tenants.

The latest Official for National Statistics (ONS) data on housing affordability, published at the end of October, covers the financial year ending March 2022.

They show that, in England, private renters on an average household income could expect to spend 26% of their earnings on an average-priced rented home, compared to 23% in Wales and 25% in Northern Ireland .

London is ranked as the least affordable region, with the average rent being 35% of the average income.

ANNOUNCEMENT

Looking to the year ahead, Rightmove predicts average rents will rise by 5% outside London and 3% in the capital.

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