London to lead long-awaited slowdown in UK rent growth next year
THE pace of spiralling rental costs in Britain’s housing market is finally beginning to slow, offering tenants a glimmer of hope that their next monthly hike will be less severe.
The average annual rent increase for newly let UK homes is set to slow to 5 per cent by December 2024, down from almost 10 per cent in October this year, according to property portal Zoopla. In London, where affordability pressures are starting to cool demand, rental growth is on track to rise just 2 per cent by the end of next year, the lowest annual increase since 2021.
“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.
UK households are facing pressures on multiple fronts, triggered by pricey mortgage rates and the worst cost-of-living crisis in a generation. Meanwhile, tenants are bearing the brunt of the turmoil as landlords – whose interest-only mortgages are particularly exposed to rate hikes – either sell up or hike rents to deal with extra costs.
The resulting squeeze on tenants’ finances is causing demand to fall. The average number of inquiries per UK rental home dropped to 17 last month, compared with a peak of 45 in September 2022. Fewer than 10 prospective tenants inquired about London rentals in November, compared with 18 a year earlier.
That means some landlords are having to price their tenancies more realistically. The share of UK homes with an asking rent reduction of more than 5 per cent rose to 7.2 per cent last month from about 6 per cent a year earlier, according to Zoopla. What’s more, one in 10 landlords slashed at least 5 per cent off their asking rent in London, the report said.
To be sure, the chronic mismatch between rental supply and the number of Britons needing a place to let is likely to underpin rents next year. There were 43 per cent fewer rentals available in the UK during the first 10 months of this year compared with the same period in 2015, according to a separate report from broker Hamptons International.
“The supply-demand imbalance in rented housing is not going to disappear in 2024, however, the market is set to become more balanced than it has been over the last 3 years,” Zoopla’s Donnell said. “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.” BLOOMBERG
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