Tenants outside of London are now facing a new challenge: record-high rental prices. According to the latest data from Rightmove, the average asking rent for new properties coming onto the market has soared to a staggering £1,280 a month for those living outside the capital. This figure marks a new peak in the rental market, surpassing previous records and signaling a significant shift in housing affordability.
London’s Rental Market
The situation in London is even more pronounced. The capital city has seen its own record-breaking increase, with rents reaching an all-time high of £2,631. This marks the 16th consecutive record in asking rent in the city, reflecting a continuous upward trend that has made living in London increasingly expensive for tenants.
Signs of a Market Shift
Despite these daunting figures, there is a glimmer of hope for tenants. Rightmove’s research indicates a potential slowdown in the rate of rent increases. In the last quarter, the rise in rents amounted to just £2 a month or 0.2%, the smallest quarterly increase since 2019. This subtle change suggests that the market might be approaching a point where further rent hikes could become unsustainable for many tenants.
The Affordability Ceiling
The concept of an ‘affordability ceiling’ has emerged, where tenants are paying close to the maximum they can afford each month. This situation is not just a theory but is reflected in actual market behavior. Rightmove reports that 23% of rental properties listed on its website have had their advertised rent reduced, up from 16% last year. This trend indicates that landlords are recognising the limits of what tenants can afford.
In a positive turn of events for those renting, the rise in rental growth is losing momentum. Rents outside of London are now 9.2% higher than last year, the lowest annual percentage increase since 2021. London mirrors this trend, with rental increases halved from 12% last year to 6% currently. This is the first time since 2021 that annual growth in London rents has been in the single digits.
Predictions for the Future
Looking ahead, Rightmove forecasts a further slowdown in the annual rate of rental growth for 2024. Rents are expected to be 5% higher outside of London and 3% higher in the capital by the end of 2024. This anticipated slowdown is attributed to a rebalancing of demand and supply in the rental market.
Lettings agents have observed signs of more choice in the rental market. Hayley Brinn of The Total Letting Service notes that prices are leveling out as more options become available, with tenants becoming more price-sensitive. She highlights that the prices of larger properties are particularly slowing down unless landlords accept lower offers. Nathan Emerson of Propertymark also comments on the encouraging increase in new rental properties entering the market.
The Cost of Renting in London and the South East
For tenants in London and the South East, the financial requirements to rent without sharing are significant. Data suggests that a salary of at least £50,000 a year is necessary. With this salary, tenants can expect a take-home pay of approximately £3,169 a month. After paying the average monthly rent of £2,145, they would be left with around £1,024 per month, or £236 a week, to cover all other expenses.
Market Dynamics
Rightmove’s research also reflects a shift in market dynamics, with tenant inquiries about properties to letting agents down by 13% from last year. Conversely, the number of new rental properties entering the market is 7% higher than last year. The average number of inquiries per available rental property is now 11, nearly triple the number from 2019.
Conclusion
Tim Bannister of Rightmove summarises the situation, noting the trend of gradually slowing rent growth, “The trend of rent growth gradually slowing continues, with an improvement in the supply and demand of rental properties having a big contribution to that. We can’t keep seeing double digit rent rises every year as tenant affordability simply cannot keep up, and 2024 is the year we think there will be a much smaller increase in advertised rents of 5 per cent outside of London, and 3 per cent in the capital.”