Rental growth drops back to single digits

The cost of new lets has increased by 8.3% year-on-year – the first time they’ve dropped to single digits in six months, Hamptons research has revealed.

To put this into context, rental growth peaked at 12.0% last August and slowed slightly to 10.2% in December.

Last month 59% of landlords achieved a higher rent when a new tenant moved in, down from a peak of 81% in January 2022 and 79% in January 2023 – so it’s no longer a given for the rent to be put up.

Aneisha Beveridge, head of research at Hamptons, said: “Last summer looks like it may have been the high watermark for rental growth. Since then, fewer landlords have been putting up the rent. Where they have, in cash terms, monthly increases have tended to be in double rather than triple figures.

“The scale of mortgage rate rises kickstarted two years of record-breaking rental growth. As landlords have rolled off fixed terms, they’ve been partly feeding these higher costs through to tenants in the form of higher rents.

“But just over two years on from the first Bank of England rate hike, higher rents coupled with higher prices more generally have placed an increasingly tight straitjacket around tenant’s finances, curtailing their ability to pay more.

“While the upward pressure on rents seems set to weaken in 2024, particularly since mortgage rates have come down, wider pressures on landlords mean rental growth will remain stubbornly sticky.

“Reduced returns coupled with the additional time and financial costs stemming from rental reform have squeezed the numbers of new landlords. This looks set to keep rental growth running ahead of inflation this year.”

Eight of the 11 regions in Great Britain saw the pace of rental growth slow between August 2023 and January 2024, the slowdown was primarily driven by London.

Annual rental growth in the capital more than halved between August and January, falling from 17.1% to 8.1%, meaning it recorded the slowest rental growth in two years.