The UK looks set to be past its peak rental growth in 2023, according to the latest figures. This news will be welcomed by tenants and prospective tenants who have been hit hard by an average rise of 10.3% in rent this year. London has been worst affected, with an eye-watering 17% hike in rental costs, taking the average monthly rent to £2,049.
Elsewhere in the UK, average monthly rents have hit a high of £1,201. The latest research on behalf of Zoopla indicates that the relentless upward trend on rents is to cool off during 2024, with London seeing the sharpest slowdown to 9% growth, Yahoo News reports.
According to the study, London listings are starting to show signs of rent reductions with 10% of listings lowered by 5% during the past month. Currently, London renters spend an average of 41% of their income on rent, compared to 28% for the rest of the UK.
Richard Donnell, executive director at Zoopla said: “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,”
He added: “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.”
The rental market has spiralled in recent years due to higher mortgage rates making first time buyers delay their move, keeping more rental properties off the market and driving up demand. Now that average mortgage rates are starting to fall, so the knock-on effect is felt in a slight easing in the rental market.
The aftershocks of the pandemic are also finally starting to recede, which saw demand for rentals shoot up as people returned to towns and cities after lockdown. As the economy begins to falter and employment prospects weaken slightly, the higher rents are starting to become unsustainable.
However there is still a lot of demand from overseas students and high levels of immigration to the country. The demand for rented homes still continues to outstrip the total amount of rental stock available, so while rent growth will slow in 2024 it is unlikely to plateau or fall.
The report said: “The slowdown in rental growth over 2024 will be kept in check by an ongoing scarcity of supply brought about by low new investment in the face of more regulation and higher mortgage rates.”
“We expect rental growth to continue to run ahead of earnings growth in regional housing markets over 2024 with rents rising by 5% to 8%, largely due to underlying scarcity and headroom in rental affordability for rents to rise further.”
While this is positive news for renters, there are further concerns about the number of landlords selling up due to higher mortgage rates and tougher regulations.
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